People take out a life insurance policy for a variety of different reasons, but the fundamental underlying reason is to ensure that funds are available in the event of the death of someone who has a financial responsibility to someone else.
Each case is different but most people take out life insurance to ensure that their family is financially secure and can continue to maintain their standard of living after an unexpected death.
Life insurance policies tend to pay a lump sum and therefore a calculation will be needed to establish exactly how much life insurance you should have in place. If you are specifically looking for a direct replacement for lost income in the event of a loved ones death, a family income benefit plan may be an alternative to a normal lump sum based life insurance plan. The payout is usually calculated according to the earner's net salary, the number of years it will be needed to maintain the family, as well as any additional expenses.
One of the most important and most common reasons for putting a life insurance plan in place is to protect a family against the untimely death of a parent. This is especially important whilst children are young. Over and above the need to make sure that the main wage earner has life insurance in place, it is important to make sure that the family could survive in the event of the parent that spends most time with the children dying as well.
Next: Why do people take out life insurance policies? (continued)
