No Life Insurance? What is the real cost?
Sarah is in her 40s and on her own with 3 teenagers. Unable to work and with her own health problems, she was getting by on various pensions and benefits. Luckily, she had a supportive extended family. Her husband, the breadwinner of the family, had died years ago and didn’t have Life insurance.
Megan is another one, in her late 50s. Like Sarah, her husband had died without Life insurance. And being self employed, he didn’t have much in super. Megan is now back at work in a job she hates trying to pay down the mortgage.
These situations are hard to see when they could be so easily avoided.
Your greatest asset
We insure our cars, our home and contents, our pets? Even our phones!
But what about your life?
Financially, most people’s greatest asset is themselves, i.e. their ability to earn. It is staggering how many people supporting a family don’t have Life insurance.
The odds
What are the odds of your house burning down? Probably very small on a day-to-day basis.
But what happens if it does burn down? Where would that leave you and your family?
The financial consequences are catastrophic, let alone teh emotional and logistical upheaval.
So most people insure it, right?
Surely your family is worth more than your home? .
How much cover?
An adviser can assist you with that and we get very spcific. You don’t want more than you need, but you need enough.
For example:
Could your partner cover the mortgage repayments without your salary?
Car loan?
Can they cover basic living expenses?
Will they have to retrain? How long will that take?
If they are at work, what about childcare?
What about the increase in expenses when kids start school? For how many years?
And what about the emotional toll – they may need a good amount of time to adjust to a new life.
Are there assets to sell to assist with this? Would you want to sell them?
There may be super, but should that be left for your retirement?
This is a non-exhaustive list of questions but will get you thinking in the right way.
How much does it cost?
Whilst the levels of cover can appear large, the cost is relatively cheap.
Most people are pleasantly surprised.
It’s impossible to give a price as premiums will vary according many factors including your age, health, occupation and premium structure as well as the level of cover you need.
It can usually be paid for from super if you wish.
“I have Life Insurance in super.”
This is often called ‘group’ cover. It is a notional amount of cover that increases with age to middle age and then declines.
It is often not enough to meet people’s needs once they have a family. How can it be? The super fund doesn’t know your situation.
Something may be better than nothing. But being lulled into a false sense of security can be dangerous.
It is not your super fund’s job to insure you!
Further, group cover is not usually fully underwritten, so you may not know that you aren’t necessarily covered for pre-existing conditions.
It’s personal
Levels of cover are specific to you. Just because your mate has $1m Live cover doesn’t make it right for you.
Different insurers are good at different things as well. For example, Insurer A may treat your medical condition more favourably than Insurer B.
Lastly, your need will change over the years. Incomes change, debt hopefully reduces, kids grow up. It’s important to reassess regularly, which is what we do with all of our clients.
Your choices
Like they say, you get what you pay for and cheap is cheap for a reason.
Seek advice and understand your policies.
The information contained in this blog has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.