First home buyers

Do I Need Life Insurance?

So you've heard about life insurance but do you actually need it? Read this guide to work out your needs.

Figuring out whether you need life insurance (and what type is suitable for you) can be confusing at the best of times. As we enter different stages of our life it is important to consider different types of insurance to ensure your loved ones are protected from unforeseen losses.

There are signs in life that suggest that you need cover.

Many people take out life insurance at significant life moments. These include:

  1. Having kids
  2. Buying a house
  3. Changes financial situations
  4. Getting married

Source: Deloitte

Is there a perfect age to get cover?

This will usually depend on your needs at the time e.g. the life events that occur during that age and the financial obligations you have.

AgeLife eventsFinancial obligationsTypes of insurance to consider
18-25
  • Start full-time work
  • Move out of home
  • Start accumulating wealth
  • Everyday living expenses
  • Small personal debt
  • Income Protection
25-35
  • Increase in income
  • Purchase house
  • Increase in short-term debt
  • Marriage
  • Children
  • Short term debts
  • Spouse and children
  • Everyday living expenses
  • Mortgage
  • Life cover
  • Income protection
  • TPD
  • Trauma
35-45
  • Increase in earnings
  • Reduction of debts
  • Outstanding mortgage and personal debt
  • Investments
  • Everyday living expenses
  • Retirement fund
  • Life cover
  • Income protection
  • TPD
  • Trauma
45-55
  • Maximum earnings
  • Preparing for retirement
  • Less financial commitments as children move out
  • Outstanding mortgage and personal debt
  • Investments
  • Everyday living expenses
  • Retirement fund
  • Life cover
  • Income protection
  • TPD
  • Trauma
55 and Over
  • Protecting wealth accumulated
  • Retire from full-time work
  • Finance lifestyle with savings
  • Everyday living expenses
  • Any outstanding debts
  • Medical costs
  • Funeral Costs
  • Life Cover
  • Trauma Insurance
  • Funeral Cover

What types of life insurance are available in Australia?

It's a good idea to understand the main types of cover you can get:

type-of-life-insurance

  • Life cover. Life insurance provides a lump sum benefit in the event of death or terminal illness.
  • Income protection insurance. Income protection offers an ongoing benefit of 75% of the policyholders regular income if they are forced to take time off work due to illness or injury. This benefit is usually paid monthly.
  • TPD insurance. Total permanent disability (TPD) insurance provides a lump sum benefit if the policyholder suffers a disability as defined in their policy.
  • Trauma insurance. Provides a lump sum benefit if the insured suffers a medical trauma that is specified in their policy. Most policies will cover up to 50 different conditions including stroke, cancer and heart attack.
  • Funeral insurance. Funeral insurance provides a lump sum benefit to cover funeral costs and other outstanding expenses. The maximum amount of cover that can be taken out is usually about $30,000.

Based on where I'm at in life what type of cover do I need?

Everybody is different and cover requirements will change based on the events you encounter at different life stages. Its worth reviewing your life insurance every year to ensure you have enough cover in place. The graphic below gives an overview of key times to take out cover in different life stages.

Life Insurance States Graph

Do you still need life insurance if you're retired?

It is natural for the need for life insurance to reduce once people enter their retirement years and their financial obligations change. You may wish to decrease the amount of cover you have in future years but still have some in place to:

  • Provide a legacy to your surviving children in the event of your death
  • Cover funeral expenses
  • Tie up any final expenses such as legal fees or taxes

It is worth taking into consideration existing assets that may be used in the event of your death such as:

  • Superannuation
  • Savings
  • Property
  • Other assets such as car, contents

Do you need cover if you're young?

You may not require life cover at this stage but may want to consider funeral insurance to cover the cost of your funeral or TPD, Trauma or Income Protection to provide you with an income if you suffer a serious injury or illness.

Steps to determine sum-insured required

life-insurance-needs
 

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Coverage is the amount of money that you will be paid in the event of a claim. An insurance consultant can help you determine an appropriate amount. Calculator
Provides a lump sum payment if you become totally and permanently disabled and are unable to return to work.
Provides a lump sum payment if you suffer a serious medical condition. Cover can be taken out for 40-60 medical conditions depending on the policy you choose.
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Compare Life insurance quotes from these direct brands

Rates last updated December 13th, 2017
Name Product Maximum cover Maximum Entry Age Minimum Sum Insured Guaranteed Future Insurability Expiry Age Short Description
$15,000,000
69
$0
Yes
99
Get a quote for up to $15 million in life insurance cover. Cover can be tailored to meet your personal needs.
$1,500,000
65
$3,000
No
80
Choice of cover options and flexible premiums to suit budget. No lock-in contracts and fast application.
$1,500,000
65
$100,000
Yes
99
Receive a discount of 10% on life insurance as a Woolworths Rewards Member. T's and C's apply.
$2,000,000
59
$50,000
Yes
99
Get flexible life insurance up to the sum of $2,000,000.
$1,000,000
64
$100,000
No
Get a refund of 10% of the premiums you've paid (in the first 12 months) with The Real Reward™ .
$1,500,000
69
$0
Yes
99
A simple life insurance product that can offer up to $1,500,000 in a lump sum payment on death or diagnosis of terminal illness.

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Maurice Thach

An insurance-savvy writer for finder.com.au who loves finding an answer to the question "Am I covered for ________?"

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