Life Insurance is your children being able to stay at school; your family keeping their home; and your partner being able to live the life you’ve planned together. That’s what Life Insurance is really about: protecting the ones you love and the choices and options you’ve worked hard to create.
Mark is 54 when he passes away from skin cancer, leaving his wife Susan with a $500,000 mortgage and two school-age children. While Susan is already working part-time, the income isn’t enough to cover their ongoing commitments. It is also important to Susan to have enough time for the kids, and she isn’t sure if a full-time job would allow that.
After Mark’s estate has been finalised, Susan receives an $873,000 Life Insurance payment. This means Susan can raise the kids without financial pressure, and continue enjoying the lifestyle she and Mark had worked hard to create.
When purchasing life cover, take into account what other types of life insurance you need, such as income protection and disability cover.
When deciding how much life cover you want, think about:
Life cover is ‘guaranteed renewable’, meaning it will generally only stop if you stop paying for it. It will continue even if you suffer an illness or injury, which would otherwise prevent you from taking out life cover.
Think about what you want to cover. For example, you may want to cover your mortgage, education costs for your children and credit card debt. It is important to remember that the higher the level of cover, the higher your premiums will be. Ask yourself how long you want to hold your life insurance for and make sure you can afford to pay the premiums over time, especially if your premiums rise each year.
Consider whether your family could sell your home and move somewhere else or downsize to raise money to pay off your debts or mortgage.
When researching life cover options, note the difference between the type of life cover discussed on this webpage and ‘accidental death’ cover, which is not guaranteed renewable and only covers you if you die in specified ways. Always ask lots of questions until you understand exactly what you’re getting.
Discuss it with your family
Don't only insure the highest income earner in your household
Be realistic about how much cover you need
Decide whether you want stepped or level premium
Read the product disclosure statement (PDS) to find the benefits and any limitations on your cover
Once you know which cover and how much you need, shop around to compare costs with at least two other insurers
Check if your product is inflation-indexed so your cover keeps up with the cost of living