Why women should consider life insurance or income protection.
Did you know that one in four women1 wouldn't be able to survive on sick leave and savings if forced out of work? Or that more than 52% of women2 identify as the main breadwinner in a family?
This is why it makes sense to consider some form of insurance to cover your income in the event of something tragic like death, major illness or injury. While it's not the prettiest topic, we owe it to ourselves and our family to be ready if things go south.
What is life insurance and income protection?
These are two types of cover which should strongly be considered:
|Life insurance||Income protection|
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Australian women are at risk of underinsurance
finder's research indicates that women are significantly less likely to protect their income in comparison to men. We analysed 7,000 income protection quotes on the finder.com.au engine and found that only 31% of quotes were taken out by women (vs 69% taken out by men).
Similarly, a survey of 1150 Australian women conducted by Westpac showed that 6 out of 10 women did not have life insurance, with 5 out of 10 stating their partners does not have it either2.
Women now contribute a great portion of combined household income to their families. These families could experience great financial hardship if this steady income was suddenly taken away.
Not interested it seems
The study showed that almost seven out of ten women (68%) who did not have life insurance, were not interested in taking out life insurance at all. It is vital as a women that you do not underestimate your value to the household both in terms of financial contribution and the role you play within the household.
Does life insurance make sense if you are a stay-at-home mum?
If for instance you are a stay at home mum, there are life insurance options that make sense. If you spend time taking care of the kids, then a permanent nanny may need to be hired, or your partner may need to take time off work if something happens to you. While it is an unpleasant thought, it is important for women to consider their own situation and how their family may be impacted on if they were to pass away.
When do women take out life insurance?
Our research4 found the two key triggers for woman to take out life insurance are are:
1. Getting married
2. Having kids
Benefits of women’s life insurance
There are many benefits that come with having life insurance cover for women. Some of these benefits include:
- Peace of mind and financial security for loved ones: With life insurance cover in place you will be able to enjoy the peace of mind that your family has financial security in the unfortunate event of your demise. This means that in the event of your death they will not be left to deal with financial anxiety in addition to dealing with their grief.
- Selection of Beneficiary: The policyholder is able to select up to 5 beneficiaries, who will get the insured amount after the policyholder passes away. Policyholders can choose both friends and family members to be the policy beneficiaries. This selection can be adjusted at any time.
- A Choice of Plans: The vast number of life insurance providers and products on the Australian market means that you have a greater chance of finding an affordable policy with all of the necessary benefits and features for your situation. You may also choose different types of life insurance to accommodate for your specific needs.
- A Wide Range of Optional Benefits: Most policy providers understand that everyone’s needs are different, and hence they provide a wide range of optional benefits that can be bought for a higher premium rate. Some providers even provide additional benefits at no extra cost.
Different types of life insurance available to women
- Term Life Cover: Offers a lump sum payment to your beneficiaries in the event of your death or if you are diagnosed with terminal illness (less than 12 months to live).
- Income Protection: Provides a regular benefit of up to 75% of your income if you become unable to work due to serious illness or injury.
- Total and Permanent Disability Insurance: Pays a lump sum amount if you are unable to work due to disablement which is deemed total and permanent.
- Trauma Insurance: Provides a lump sum payment if you suffer a trauma condition as defined by your insurance policy. Common Trauma conditions that are often covered include cancer, heart attacks, open heart surgery, brain tumours and stroke.
Life insurance cover for women in all stages of life
Young women may not have dependents, only a few small loans, a relatively low income and very few other financial commitments. It may seem as if life insurance will not be necessary here, but what happens if you become ill or are hospitalised and are unable to work for a long period of time? Will your parents or friends be able to support you? In this instance, it can be worth considering Income Protection Insurance.
Middle age women are generally experiencing an increase in income, possibly have taken out a mortgage and are in the process of repaying it and they may have started a family. Here the need for life insurance is most prevalent, as you have people who are dependent on you and you have large debts to be repaid.
40's and 50's
Women whom are in their 40’s and 50’s could be at the peak of their employment in terms of income, they may have paid off or almost completely paid off a mortgage and have children whom are entering university or becoming financially independent. Here life insurance policies are to help with a secure retirement, and to pay off any last debts or fees for your children. Life insurance policies may be taken out to ensure that you and your family are able to continue to live a comfortable lifestyle. It can also be worth considering Trauma Insurance Policies to ensure their is cover in place should you suffer a critical condition.
How much life insurance coverage is adequate for women?
Everyone’s situation is different and you should reflect on your own circumstances and needs before purchasing life insurance coverage. Some of the things that you should consider when deciding on how much coverage you should take out:
- The cost of feeding, clothing and educating your kids if they are still dependent on you.
- The possibility of someone in your family facing a reduced income due to time spent on looking after your kids.
- Whether childcare will be necessary, and the costs associated with that.
- How much you still owe on long financial commitments such as a mortgage, car loans, credit card debts etc.
- The loss of your own income and how your family will make up for that to pay for bills, accommodation costs, food and essential day to day payments.
- Funeral expenses can be expensive and you may need to factor this into your calculations.
- Whether or not you’d like to leave money for your kids to help with payments towards a house or car when they are older.
- Understand how parental leave can impact cover. If you have TPD cover on your policy then you'll need to be working at the time of an incident in order to be covered. Likewise with income protection.
- Make sure you're not over or underinsured. Use a calculator to work out how much you really need.
- Compare women focused conditions. If taking out 'trauma cover' in your policy make sure you look at it's coverage for illness related to women e.g. breast cancer.
- Protect the future of your children: Some companies offer specialised Child Cover options on standard policies that you may want to consider. This is usually in the form of a lump sum payment if your child suffers a traumatic event or passes away.
1 finder survey August 2017
2 Roy Morgan: The rise of the female breadwinner, 2017
3Ruby Connection, November 2012
4 finder survey October 2018