Do I Need Life Insurance?
1 Apr 2024 • General Knowledge
Most of us carry around the vague (guilty) feeling that we should have life insurance but… we don't really know much about it, or if we really need it, or even how much we might need!
This article isn't going to pretend to have all the answers, but we can help clarify some of the things you may want to consider.
What is Life Insurance? Understanding Types of Cover in Australia
In Australia Life Insurance is a bit of a catch all phase that covers 4 distinct products (there are more but these are the primary covers).
Life insurance
Which pays a lump sum benefit to your dependents in the event of your death. Some policies may also pay a terminal illness benefit.
Total and Permanent Disability
This pays a lump sum in the event you are permanently disabled and unable to work again, either in your own profession or any profession, depending on your policy selections.
Trauma Cover
Pays a lump sum if you are diagnosed with a traumatic or critical illness (such as cancer). This supplements medical costs covered by Medicare or health insurance, and covers things like hiring a carer or costs for hospital visits.
Income Protection
Replaces your post-tax earnings by paying a monthly amount. Income protection is usually short term, with most policies 2 or 5 years, although some insurers do offer cover to age 65.
Do You Need Life Insurance?
The usual thinking is - if you have people in your life who are financially dependent on you, such as a spouse or children, you should secure that financial commitment with insurance.
But, most of us are also dependent on our own income. If you are single, without children, then you probably don't really need death cover. But what if you were not able to work again?
Do you have friends and family who could support you? Or other investments that would allow you to retain your lifestyle and independence? If not, then having that safety net of insurance for illness or injury means you'll have better options if the worst happens.
Using a life insurance cover calculator can help Australians determine the right amount of cover for their family.
When you don't need Life Insurance
You may not need cover if you are lucky enough to:
- have savings or an income stream that will meet your financial needs,
- be debt-free,
- have family or loved ones who would support you in illness; and / or
- if you have a spouse whose income can cover your shared expenses.
When Should You Consider Life Insurance? Key Milestones
A new job where you are earning more.
Getting married
Having a baby
Buying a house.
Why not check out our cover calculator?
Cover Calculator