There are two key elements in assessing the level of cover that is appropriate. The first is the amount you owe and the second, what your essential living expenses are. It is important to work out a household budget and look at what you and your family would need to cover if you were unable to work, or even worse die prematurely.
Life cover is about ensuring there is enough money when you pass away, but it is also important to consider what would happen if you were ill and unable to work for a long time. Ideally if finances permit, at least essential expenses should be met by income protection insurance which will provide replacement income if you are ill and unable to work.
The biggest financial obligation that anyone has is almost always a mortgage. In some countries, like Ireland, it is compulsory to take out life cover with every mortgage purchased. While this isn’t the case in Singapore it is essential that a mortgage should be paid off on the death of one partner. This not only removes a financial burden and the worry about whether the remaining partner can continue to live in the family home but also provides a remaining partner with an asset that may be used to support them in a different financial environment.
The other major issue is affordability. What ‘affordable’ means will vary from family to family and is dependent not only on your income level but on your priorities.
One important point is that you should buy cover as young as possible. Generally, life insurance is less expensive the younger you are when you initially purchase it.
You should also review the small print if you took life cover out in your home country. Some policies become void if you are not resident for a certain time in the country you took out the policy. So, you may be paying for something that won’t actually cover you.
If you would like to discuss your protection needs or book a complimentary financial review please visit aam-advisory.com or call 6653 6652.
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