The main purpose of life insurance is to enable your family to continue their current lifestyle when you are no longer able to provide an income. It is also designed to help meet specific needs that your family will have in the future. Remember that women are increasingly earning good salaries and it’s perfectly logical that a woman should also have a life policy.

Here are a few examples of how a good life insurance policy can protect your family:

• Life insurance will replace your income when you die.
• It can pay off your bond and provide your family with a debt-free home.
• Credit cards and consumer debts (like car loans and clothing accounts) can be settled with life insurance benefits.
• A properly calculated policy will provide funding for a quality education for your children.
• Funeral expenses can be paid from your life insurance proceeds, preventing the need for your spouse and/or children to have to deal with them at the worst possible time.

So how much life insurance do you need?
As a general rule, a married couple with children should purchase a life insurance policy for at least 8 - 10 times the primary wage earner's annual salary, but special circumstances may require more:

• Do you have a large bond on your home?
• Do you have one or more children that will eventually attend university?
• Do you have one or more family members who are disabled or someone who will require extensive medical care?
• Will your parents require financial assistance for their retirement?

If you answered 'yes' to any of these questions you need to adjust the amount of life insurance coverage accordingly. It's better to have too much coverage rather than not enough. A good independent financial planner can help you determine the amount of coverage that is best for you and your family.

I often hear from individuals that life cover is too expensive. In many cases the client has been sold a policy with an investment element, pushing up the premium.

For example, regular life cover for a 30-year-old may cost R400 a month depending on the amount of cover. However, salespeople often convince the buyer to take out a tandem investment, which could double the premium.

Although it is important to have investments, it is not a good idea to lump them with a life policy, for several reasons.

• The amount of the investment is affected by the costs of the policy and this ultimately results in lower returns.
• You have no control over where the money is invested.
• If, for some reason, you cancel the policy you could also lose the investment amount.
• In the event of your death your heirs will receive only the life portion of the policy. In other words, if your life cover is R500 000 and you have invested R50 000, only the life portion will be paid out.

Even if you can’t afford the full amount required, a small policy is better than nothing. Look at your lifestyle and see if you can reduce some of your expenses, as the sacrifice will be well worth the peace of mind.