What Kind of Life Insurance Do You Need?
Don’t believe what insurance agents tell you—some people just don’t need life insurance.
On the other hand, some people need it desperately.
Before you sign up for cover, go through this checklist to see if you need insurance.
The Life Insurance Checklist
- Do you have children?
- Do you have an older parent who depends on you financially?
- If you’re married, does your spouse stay at home? Does he or she depend on your income?
If you answered yes to any of these questions, you should buy life insurance immediately.
But if you’re single and don’t have any children or other dependents, you can skip life insurance for now.
How Much Should You Buy?
Before you sign up for the cheapest policy available, think about what this money will actually cover. Ask yourself the most important question about the money: lump sum or investment?
If your spouse’s job can cover your family’s needs after you’re gone, then you can buy a smaller life insurance policy. Just $100,000 could cover funeral expenses, allow your spouse to take time off work, and pay off part of the house.
But let’s say your spouse isn’t qualified for high-paying jobs. In that case, you should invest your life insurance cover so they could live off the interest. This also means that you should buy a much larger policy.
Let’s say your current income is $50,000. For your family to collect that much per year after you die, you need a million-dollar life insurance policy. Fifty thousand dollars is a 5% return on $1,000,000 per year—a safe, conservative estimate for the Australian market.
Should I Use the Life Insurance through my Super?
For most people, the answer is yes—superannuation funds are an easy and efficient way to get life insurance. You can pay your premiums through your super balance so you never worry about missing a payment. And, if you’re self-employed, your premium payments are likely tax-deductible.
If you have children or other dependants, buy life insurance now. The process isn’t complicated, and the peace of mind is worth whatever premiums you pay.