The Capital Needs Analysis method is used by most insurance agents or planners and at most financial-planning web sites. Chartered Life Underwriters (CLUs) know the method as the Human Life Value Concept or the Human Capitalization Method. These methods include the income you will earn from your present age until retirement, assuming a rate of interest that represents salary increases through that period.

for example: As a thumb rule, if you are 30 years of age, you should insure yourself for an amount approximately 8 times your annual income. At 35, your investment should be close to 6 times your income. Of course, the exact amount of your investment should be determined by the number of people who depend on you, you’re existing investments and your life stage.

You can get policies where you set the growth rate, or some will link to RPI.

Many will give you the option of 'taking or leaving' the increase offered, although most will say that if you decline the increase two years on the trot they will cease offering them

There is a serious 'see an IFA' point to worry about though.

Many policies that will link the cover to RPI will have the premium increase by more than the cover increases.

For instance, one I looked at recently had the cover increasing by RPI but the premium increasing by RPI + 2.5%

You may need to ask your IFA to check this, is obscure enough to be overlooked, and while this year or next it will make little difference, in 15 or 20 years time it will make a fair difference. As this forum proves, there is never going to be a time of life when money doesn't matter (unless you are very lucky).

Hope that helps

Adrian

Speak to your IFA or Mortgage Broker and get them to set up a plan that includes Indexation. This is a plan that will rise with expected inflation so that your plan value will hold its value through out the term.

It is now widely recommended to place the policy into Trust....speak to your IFA or broker about how this works and whart benefits you will gain from it.

Hello,

I am enquiring about a joint life insurance policy with my wife at the moment. I am thinking of getting about £300,000 of cover. My query comes to the fact of the actual value of the policy. I want to have the policy for 25 years. If something happens to me now then my wife will be fine with £300,000. But what if something happens in 20 years time. With inflation how much is the £300,000 worth? Would it be only worth the equivalent of £200,000 then? Has anyone got an equation for working out what the value of the money is worth given an average inflation rate over the years?

Thanks
Richard