Protect Your Family
Throughout your life you accumulate certain financial responsibilities such as a mortgage, car loan repayments and so on. No financial responsibility surpasses that of family. Keeping your family in a nice home, well fed and educated costs money – as you well know. If you are the sole (or primary) bread winner in the family then you need to think about the future of your family if something unfortunate were to happen, such as getting into a serious car accident – how long would your family stay afloat without your income to support them? With grocery bills, mortgage or rent payments, utilities? That is where income protection insurance comes in.
When considering purchasing income protection insurance, you must first understand your needs. You understand your financial situation better than anyone else, so do not let anyone convince you to purchase a policy you are not comfortable with purchasing. If you add your debt, estimated funeral costs, and 6-12 months of income replacement, then you can get an estimate of your insurance needs.
Even if you do not provide an income to your family, a income protection insurance policy might be worth considering. If you are a stay at home parent, there would be costs associated with child care and house upkeep in the event of your death. Funeral costs can also be expensive. Talk to an insurance expert to decide how much insurance is right for you.
If you are considering purchasing income protection insurance, consider carefully why you think you might need it. A income protection insurance policy isn’t always a good idea. It is primarily designed to protect those who depend on your income in the case of your death. If you have or anticipate needing to care for a family or an elderly parent, income protection insurance would be a good investment, but not otherwise.
When you are thinking about how much income protection insurance to purchase, it’s a good idea to get at least eight or ten times the amount of your annual income. With this amount, if something happens to you, your dependents will be able to invest wisely and continue to take care of their living expenses in the long term.
As you get older, evaluate how your income protection insurance needs have changed to be sure you aren’t paying more than you should. For example, if you are retired and your children are all employed and living independently, there is no need for a zillion-dollar policy. They simply don’t need that income if something should happen to you. So if you have no dependents in the house and no debts, you should ramp down your income protection insurance coverage to a minimum level – say, to support only your spouse if he or she survives you.