We’re still on the subject of insurance, and while the last post looked at insurance options if you’re single, here we consider what you might do if you’re in a relationship, and also if you have dependents.
If you’re in a committed relationship but have no other dependents, then you should both have life insurance to cover any joint debts, plus an additional sum to provide a cushion for the remaining partner while they get used to life without you.
If you are the primary earner, and your death would mean considerable financial hardship, then consider some family income benefit insurance – life insurance that pays out a regular income so that it will replace your income to a point after you’ve gone to your surviving partner.
The next priority is income protection for both of you ideally, but certainly for the main breadwinner, then critical illness after that. So, life insurance, both to cover any joint debts and to leave either a lump sum or a regular income for those left behind, income protection next priority, then critical illness, in that order.
You can either cover the full amount of any debts for critical illness and that’s certainly ideal, although that can be quite expensive. So you could compromise and say, “I’m going to take critical illness cover out, for example, for three years of mortgage payments, or five years, so you know at least the mortgage will be paid for a decent period of time, and that would be a really useful cash buffer to have behind you.
Insurance Choices for Parents
Next up, if you have a partner and you have kids, then that’s a different scenario again. Consider everything I’ve just mentioned, so life cover for joint debts, but then there must be some extra cover for the family. This can be in the form of a lump sum or a family income benefit, or both.
Then, it’s income protection for you both or for the main breadwinner if things are skewed that way, and finally critical illness cover. So just more life insurance, essentially, if you’ve got kids.
If you’re a single parent, then things are slightly different again. First priority is life cover for debt payoff and then provision for your kids until they are at least 18 and ideally 21. I’ll get to amounts further down. Life cover first, pay off any debt and provide for your children if you’re no longer around to do it. That’s your number one priority.
Then you’ll need to protect your income so that you can continue paying the bills and raise your kids if you can’t work for whatever reason. Then, if budget allows, critical illness cover. It might well be unaffordable, but don’t discount it automatically – do your homework and find out the cost first.