LIFE INSURANCE COVER ~ Can I be Overinsured?

Very few people are ‘overinsured’ in fact it is more likely that most people are underinsured.

A quick way to assess whether your insurance cover is sufficient to cover your financial needs and obligations is to employ the following calculation: -

What are all your Mortgage, Loan Credit Card commitments: - £X

What income would your family need for the rest of their lives if you were not around to support them.

For example to replace an income of £25,000pa over say 30 years allowing for incremental increases and inflation you would probably require an insured sum of £1,000,000.

You may think that is ridiculous but look at it this way.

£1,000,000 paid out in 1978 may when invested in a safe location at say 5% return provide an income of £50,000pa. Now that may look pretty good but the Tax man wants some of that now which could be as much as £8,000 leaving you with £42,000pa which is still not too bad. Then there is inflation which has the effect of reducing the value of your money every year. This has averaged 4.9%pa over the last 30 years gradually eating into the value of your income. The result is if the £1,000,000 had been paid out in 1978 and a review was made of the revenue return value of the fund in 2008 the sum of £40,000 would be worth in 2008 only about a quarter of its original value in buying power and living costs ~ £10,000pa.

Oh, you have not yet deducted your other financial obligations from the £1,000,000 in order to clear them so what would you have been left with after that.

Therefore are you overinsured or underinsured? Ask for a personal assessment today and see for yourself..

Finally some say that their employers Death in Service provision will pay out a lump sum. It may well do but that depends upon your employer having a scheme that will provide this and also that you will always be with an employer that will be able to provide you with such a sum. When you leave that employer you leave behind any benefits that may have existed so where would that leave you then.

Visit the Bank of England Inflation Calculator for more information: -

http://www.bankofengland.co.uk/education/inflation/calculator/flash/index.htm

Please therefore just contact us either by phone on ~ 0845 642 0644 (Local Rate), use the quick Mortgage Finder ~ CALL BACK FORM or use the brief Mortgage Finder ~ ENQUIRY FORM, and then simply allow us to assist you with further information without any obligation whatsoever.

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