Whoever said, ‘the more things change the more they stay the same’, was dead wrong when it comes to life insurance. While protection against adversity is always wise, your actual needs change as you move through different ages and stages of life.
From when you take your first job and go out into the world, life
- Income protection – Pays a monthly benefit if you are unable to work due to sickness or injury
- Trauma – Pays a lump sum for a specific injury or illness
- Total and permanent disability (TPD) – Pays a lump sum if you are permanently unable to work
- Death – Pays a lump sum if you die or become terminally ill.
Life insurance is like a bell curve – you need a low level of cover when you are setting out life, growing to a high level in your middle years when your responsibilities and debts are at their peak and then possibly dropping back when you retire.
The need for cover is ultimately about ensuring you have sufficient financial back-up should something go wrong. While superannuation offers most Australians some form of life insurance, it is generally a basic level of cover and may need topping up outside super.
Each stage of life has its challenges, whether you are young and single, just married, starting a family, empty nesters or retiring. Whenever a major event occurs in your life, such as marriage or the birth of a child, you need to consider whether you have the right cover for your current needs.
Young and single
When you are starting out in life you may not need life cover, but what would happen if you were injured in a car crash and couldn’t work for six months? What happens when your sick leave runs out? How would you pay your rent, car loan, utility bills and basic living expenses? That’s when income protection insurance can be a lifeline.
Once you are part of a couple you naturally want to protect each other’s wellbeing. If something happened to either one of you it could put tremendous strains on the other person. This is even more likely if you have bought a home and are saddled with a mortgage.
Life insurance, income protection and trauma insurance can all help you protect your lifestyle. And both partners should seek cover because both are contributing.
Starting a family
Once children come on the scene, the need for life insurance is even greater. If something were to happen to you or your partner, then the financial burden could be significant. Who would look after the children? Could they stay at the same schools? Could your partner pay the mortgage on one salary?
Income protection, life insurance, trauma insurance and total and permanent disability should all be considered. Once again, it’s important to make sure both partners are covered – even if one isn’t working, the costs associated with childcare and household tasks can be considerable.
Just because the children have left home doesn’t mean you don’t still need access to money should something occur. Sure, you are probably at the peak of your earnings, but many empty nesters still have a mortgage. Even if you don’t, why put at risk all the wealth you and your partner have worked hard to build up for your retirement? Life insurance can help you protect these assets.
Once you are retired, your need for life insurance may diminish. At this stage of life, you will probably have paid off your mortgage and your children are likely to be independent. As a result, insurance cover might just be a means to leave an inheritance for your children. Or you might want to have a policy to provide for your funeral.
Life is forever changing, as are your insurance needs. It is not a one-size-fits-all.
Call us if you want to discuss how to shape your insurance to meet your current needs.