Life insurance protects those who depend on you, such as your wife, children and possibly, your parents. If you die prematurely, life insurance can settle your outstanding debt and provide ongoing income to your dependents, until they are able to live comfortably without it.
It can also provide for everyday expenses as well as potential legal, medical and funeral costs, should family savings not be sufficient to cover them.
In reality, insurance is something everyone should have. In the unforeseen event of your death ; what would the immediate impact on your family be? Are they counting on your income in the years ahead to cover basic needs and future expenses? Could they afford the funeral costs? Who would pay the bond?
At this stage in your life, if you still don't have life insurance, maybe it's time to consider getting some - for your and your family's peace of mind.
Life cover is a cost effective way to replace your income earning potential should you pass away and therefore provide for your family or loved ones should you not be there to provide for them. It is also an effective way of clearing your debt liabilities should you pass away, preventing your family from taking over this debt - or if the debt relates to your house – from being evicted if they can't pay the instalments.
As a rule of thumb to replace your income earning potential you could use the following as a guideline:
Take your gross monthly income x 12 = annual income before tax
Calculate the number of years left to your expected retirement age, i.e. retirement age – current age = number of income earning years left
Multiply your gross annual income x the number of income earning years left = the life cover required to replace your income
Add the amount of debt/liabilities you currently have to 3
Subtract any current life insurance you have = how much life cover you should potentially have
This is entirely up to you. You might want to have your wife as the sole recipient. If you have kids, you might choose to distribute the policy amongst multiple beneficiaries. Review your plan periodically to ensure that it's up to par with the changes in your life.
Your coverage does not begin until your policy is approved and your first premium has been paid. Assuming certain conditions are met, most companies provide some temporary conditional coverage during the application process.
Failing to pay a premium may mean that you will not be covered for the specific month. It is important to contact your life insurer to make alternative arrangements. The policy may lapse if more than one premium is not paid.