Should newlyweds consider life insurance?
Did you recently get married or are you about to walk down the aisle? If so, you might think that you’re too busy planning the rest of your life to be worried about insurance.
But the reality is that now is the ideal time to be taking a closer look at your life insurance needs and thinking about buying a policy.
When do most people take out life insurance?
A 2015 Deloitte study found that there are four key life moments that are widely considered to be the “best” time to take out life insurance:
- Having kids
- Buying a house
- When your financial situation changes
- Getting married
Why should newlyweds or married couples consider life insurance?
There are myriad reasons why it makes sense for married couples to think about taking out life insurance, such as:
- You’re now sharing your life with someone. Now that you’ve tied the knot, you need to think not only about looking after yourself, but also about providing for that special someone in your life. Life insurance can help make sure that if something unexpected happens to you, your partner isn’t left to shoulder a huge financial burden on their own.
- You’re probably thinking about kids. For many Australians, getting hitched means that parenthood isn’t too far around the corner, so you’ll need to start thinking about how you would provide for a couple of kids (or more) if an unexpected tragedy occurred. Life insurance means you can continue providing for your kids long after you’ve gone, and that your family’s financial future is guaranteed.
- You might be taking on debt. Getting married often means buying a house, which usually means taking on a significant commitment to repay a mortgage. Combine this with car loans, personal loans, credit card debts and any other financial obligations, and it quickly becomes clear why the financial protection life insurance offers is so important.
- Life insurance is cheaper when you’re younger. The earlier in life that you buy life insurance, the more affordable cover is. The increased health risks that come with old age mean that buying a policy becomes more expensive as you grow older, so now is the perfect time to think about taking out cover and locking in your premiums at a more affordable level.
- You can take out more cover. The maximum amount of life insurance you can take out decreases as you age. For example, while your insurer may allow you to take out $1 million cover when you’re 30 years of age, once you pass your 45th birthday the maximum sum insured may drop to $500,000.
- You need to plan for the future. Getting married means growing up, and growing up means making responsible decisions. By taking out life insurance, newlyweds can establish a strong financial base for their new family and protect themselves from the uncertainties of the future.
But I thought life insurance only made sense after having children?
For many of us, having our first child is when we start to seriously consider taking out life insurance. The increased responsibility that comes with having an extra mouth to feed, coupled with the fear of what would happen to your child if you were no longer around, is enough to make us think about buying a policy.
However, it often makes better sense to start thinking about life insurance before you have kids, and when you get married is the perfect time. Getting married doesn’t just mean sharing your life with someone, it also means sharing your financial commitments – so comparing your life insurance options now is a good idea.
Besides, once there’s one or more kids on the scene, finding the time to shop for life insurance may be much harder than you think!
What factors do I need to consider when deciding on life insurance?
Check these off when comparing
If you’re looking for life insurance for married couples, there are several important factors you need to take into account, including:
- Your financial commitments. Do you have any financial dependants? Are you repaying a mortgage? Do you have any other outstanding debts or liabilities? Do you have any other assets to your name, such as shares, savings or property? By creating a full picture of your finances, you’ll be able to work out exactly how much life insurance cover you need.
- Your budget. Next, consider how much you can afford to pay for life insurance out of the family budget. However, while finding an affordable policy is essential, price shouldn’t be the basis for your decision – remember to consider the policy’s specific features before deciding whether it’s right for you.
- Your cover needs. What type of life insurance cover do you need? For example, do you want death cover in case the worst happens, or would you like income protection cover so you can continue to provide for your family if injury or illness prevents you from working?
- Your existing cover. While you may not be aware of it, there’s a good chance you may already hold some level of life insurance cover through your superannuation. Contact your super fund to find out what (if any) cover you have in place, and check out our guide to superannuation life insurance for more information on the benefits and drawbacks of this type of insurance.
- Premium structure. Will the policy have stepped premiums, which increase each year as you age, or the consistency of level premiums? Alternatively, will it combine the best of both worlds and feature a hybrid premium structure? Check out our guide to life insurance premiums for more details about the different structures and which one could be right for you.
- Cover features. Finally, make sure to carefully consider the features you want your policy to provide. For example, can you apply for additional cover without undergoing any further medical underwriting when your circumstances change, such as if you have a baby or take out a mortgage?
Types of life insurance cover for married couples
What type of life insurance is best for married couples? There are several cover options available, each with its own unique benefits:
- Death cover. Death cover, also referred to as term life insurance or even life cover, pays a lump sum benefit if you die or are diagnosed with a terminal illness. For newlywed couples, it lets you ensure that your untimely death doesn’t put your partner under significant financial pressure.
- TPD (total and permanent disability) cover. TPD insurance provides a lump sum payment if you are unable to work again as a result of a serious illness or injury. It can help you provide for your loved one and any dependants even if you are no longer able to earn an income.
- Trauma cover. Trauma insurance provides a lump sum benefit if you suffer a serious illness such as a heart attack, stroke or cancer. For married couples, this benefit can be used to help cover medical and rehab costs, pay off the mortgage, replace lost income and settle any other debts you may have.
- Personal accident insurance. Also known as accidental injury insurance, this type of policy pays a lump sum if you suffer an injury as a result of an accident. This benefit can be used to help you take time off work, hire someone to help out around the house, cover your medical expenses and help you keep up with all your other regular bills.
- Income protection cover. Income protection insurance provides an ongoing monthly benefit to replace up to 75% of your regular income if you’re unable to work because of illness or injury. It’s an important form of cover for anyone who relies heavily on their income in order to provide for their family and meet ongoing expenses, particularly if you’re self-employed or run a small business.
You may wish to choose one of the above options as standalone cover, or to instead bundle multiple types of cover together in one package. For example, you might like to bundle TPD insurance with death cover.
Are there discounts available for joint policies?
Yes. Buying a joint life insurance policy as a married couple is typically cheaper than if each of you buys a separate policy. There are discounts of up to 5% available for couples who purchase joint policies, so it’s worth considering sharing cover with your spouse to reduce the pressure on your hip pocket.