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.
What types of life insurance are available in Australia?
Before you work out if you need cover, it's a good idea to understand the main types of cover you can get:
- 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.
There are signs in life that suggest that you need cover.
Many people take out life insurance at significant life moments. These include:
- Having kids
- Buying a house
- Changes financial situations
- Getting married
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.
|Age||Life events||Financial obligations||Types of insurance to consider|
|55 and Over|
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.
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:
- 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.