Life Insurance at Different Life Stages

If you’ve recently experienced a significant life event, for example, bought a house, got married or started a family, your responsibilities and financial circumstances have changed. Is your current insurance adequate to meet your long-term needs?

Your life insurance must be in sync with this new phase of your life and the requirements surrounding it. If not, you and your loved ones might not be effectively protected should something happen to you. It’s essential to do a yearly review of the type and amount of coverage you have.

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How does your insurance needs change at different stages in life?

Your insurance should be updated as your needs change. It needs to protect your income and support your family to pursue future goals and dreams, even if you were to pass away suddenly or be unable to work because of an illness or injury.

In Australia, there are different personal insurance types suited to different requirements, including:

  • Term insurance: Pays a lump sum death benefit to your nominated beneficiaries, if you die or get diagnosed with a terminal illness with less than 12 to 24 months to live.
  • Total and Permanent Disability (TPD): You receive a lump sum payment when totally and permanently disabled and unable to ever work again in your Own or Any occupation.
  • Trauma cover: Also known as critical illness insurance, this cover type pays a lump sum benefit upon diagnosis of one of the critical illnesses listed in your products disclosure statement (PDS).
  • Income protection insurance: Provides a monthly benefit of up to 75% of your regular income if you can’t work, for longer than your waiting period, because of an accident or sickness.
  • Funeral insurance: A cash benefit, usually between $5,000 and $30,000, is paid to cover the cost of your final expenses.

Whenever life changes, review your life insurance needs and make sure the policy type still meets your requirements. Below are the different life stages which generally require you to re-evaluate your insurance coverage.

Young and single

Generally, young adults between the ages of 20 and 29, have a lower risk of death and less financial obligations. However, your income is possibly your biggest asset and most precious resource. You might want to consider TPD cover and/or Income Protection insurance.

However, the younger you are when purchasing life insurance, the cheaper your premiums will generally be, which is why some young adults choose to buy life insurance when still single and without kids.

Switching jobs

When changing your career, it’s important to review your new employer’s superannuation and the insurance benefits provided. You might need to increase the coverage or buy an additional policy that gives you access to more benefits, for example, a retail policy held outside of superannuation.

Starting a business

If you’ve taken the plunge into entrepreneurship, keyman insurance could be beneficial. A key-person insurance policy protects your business by paying a lump sum benefit if an essential person to the business passes away or gets diagnosed with a terminal illness.

Buying a house

If you have a mortgage, you might require additional life insurance to cover your home loan, so the financial burden doesn’t fall to your loved ones. You might also want to look at Trauma insurance because it may help you pay for medical treatments and assist you in replacing your income while you focus on recovery.

Insurance for couples

Whether married or living with your partner, having the right type and amount of insurance as a couple becomes very important. You might want term life insurance, to make sure your significant other is financially protected should you pass away; make sure they’re listed as your beneficiary.

Generally, you’ll need at least enough insurance to cover the mortgage and any other outstanding debts, pay for your funeral and provide your partner with an income for a few years.

Starting a family

When becoming a parent, you’ll want to make sure you have enough cover in place to support your partner and account for the future costs of raising your children, including school and college. Life insurance for families is especially important if you are the primary or sole breadwinner. Policy riders, like TPD and critical illness cover, might also be beneficial.

Select insurance companies may also offer you child cover as an optional benefit to your life, TPD or trauma insurance policy. Child cover generally pays a benefit when your child dies or is diagnosed with a terminal illness or a critical illness, for example, heart conditions.

With the added responsibility of a family, you might also want to also protect your income with a TPD and/or income protection policy.

Getting divorced

If you’ve separated or divorced, you should also review your life insurance, as you might want to decrease the cover amount. However, if you have children, and you must pay child support, you need more insurance.

Be sure to update the beneficiaries listed on your policy documents if you don’t want your ex-partner to receive the lump sum benefit when you die.

Seniors life insurance

Life insurance for over 50s might be necessary if you still have outstanding debts, especially a mortgage or a car. Because people have children later in life, you could even require life insurance to support yours, or perhaps your elderly parents financially.

When you’re over the age of 65 and retired, you typically don’t need income protection or TPD coverage, because you won’t be earning an income. However, trauma insurance at this stage of your life is generally essential, because the older you get, the higher your risk of developing a critical illness.

You might want to maintain a small amount of life insurance if you don’t have funeral cover or would like to leave a legacy, where the money is paid to your adult children or a chosen charity.

Choosing the right type of life insurance and making sure you have enough

By filling in a quote form and using our robust comparison tool, you can compare term life insurance, TPD, trauma cover and income protection, online. Life Insurance Direct clients receive a free yearly review of their policies to help them make sure their cover still meets their requirements.

If you’re unsure of your needs at this stage of your life, speak with our insurance specialists. They’ll help you find the policy type and amount that meets your requirements.

Published: August 19, 2019

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