The idea of life insurance is hardly inspiring, in fact it can be downright depressing! But knowing you have adequate coverage can be a huge load off, as well as a crucial gift to your family.
With a fresh year underway, and potentially some renewed energy for taking care of yourself, now is a great time to tick a few financial responsibilities off your ‘to do’ list. In working with our clients this is one of the biggest worries they have, yet the vast majority of people are uninsured or underinsured.
A young family requires approximately $680,000 worth of life insurance on average.
This is why life insurance is a lifelong gift to your family; the right coverage provides them with financial security for the future should the worst happen. Let’s look at some of the questions you may be asking yourself if you’re currently re-evaluating your level of life insurance coverage.
Do I need more coverage?
You may already have default life insurance coverage through your superannuation policy, but this may not be enough to give your family the support they need should you die.
Figures from Rice Warner show that a young family requires approximately $680,000 worth of life insurance on average, while the default amount provided through superannuation is just $200,000. This underinsurance gap could prove very costly for your loved ones, leaving them financially strained at a very emotional time.
What am I worth?
Sounds a terrible question, doesn’t it? Like many, you may feel there is no monetary value that can be placed on a human life. Even so, you’ll need to calculate the monetary losses your family would experience if you were to pass away in order to ensure they are financially secure following your death.
But every family has different needs. You may feel covering your funeral expenses and outstanding debts is sufficient, while other people believe their life insurance should replace a lifetime’s worth of income, as well as children’s future education costs and even a partner’s retirement needs. You should speak to an adviser to get the best idea of how much life insurance you’ll need, but ten times your annual salary is often used as a rough estimate.
Is life insurance enough?
Life insurance is just one element of planning for your family’s financial future. What if you experience a life-changing accident or become seriously ill? Sadly, life insurance cannot provide much assistance in these circumstances.
However, you can opt for additional coverage through total and permanent disability insurance, which provides a lump sum payment if you become seriously disabled and are unable to work again. Crisis insurance offers a similar benefit for those who suffer critical diseases or trauma.
Losing a family member is hard enough. Being adequately prepared for worst-case scenarios will ensure your loved ones don’t have the added weight of a heavy financial burden.
Learn from one of our beloved clients, Tracey, who believes it very important to share her experience.
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, your financial adviser, Invest Blue Pty Ltd and its subsidiaries operating as Invest Blue, 1300 346 837 and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Please contact us if you want more information.
What you need to know
This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.