Cheap Life Assurance
Why the cheapest policy may not be so cheerful!
A cheap life assurance policy can leave you drastically underinsured- after tax, a £100,000 lump sum return will only provide £4000 per annum at today’s rates; and that’s without any indexation. An adequate life policy can amount to twenty five times what you need to maintain your standard of living!
Here’s a simple question. How much life cover do you need? If you can’t answer that question right now, then you’re not ready to find out exactly what constitutes cheap life assurance for your needs. It’s a sad fact that almost nobody has as much life cover as they actually need for the purpose they had planned (for example, looking after the family in the event of their passing on).
Before you look for a cheap life assurance quote, here is the basic maths you need to make a sensible evaluation. First off, instead of considering the lump sum your family will receive as simply ready to pop in your pocket, think about the mortgage, credit cards or other debts that would have to be paid off first. If you think £80,000 is adequate, you’re better off upping the cover to £100,000 in anticipation of such debts.
If £100,000 sounds like a fine sum of money, think again. If you received a £100,000 lump sum, at today’s rates, and put it to work in a stable basic interest-bearing account, it would give you an annual income of only around £4000 without eating into the original cash. Add to that the implications of tax, and you’ll receive even less.
A £100,000 policy may look like cheap life assurance, but as you can see, the results leave you high and dry. £4000 is so negligible in today’s market that you might be left wondering what on earth you bothered paying the premiums for.
Expert opinion suggests that adequate life assurance amounts to twenty five times the amount needed to maintain the standard of living for your family for a year. Astonishingly, that means that if you’re a family with a combined income of £40,000 per annum; the ideal life cover is an astonishing one million pounds.
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