If you’re a parent or you’re about to become a parent (congrats!), then you’ll know how terrifying it can be when you realise you’re literally responsible for another human being other than yourself! Typically, this is the kinda stuff that you don’t really want to think about, but trust us when we say that once it’s sorted, you’ll feel a whole lot better.
With all that in mind – here are some things to think about when it comes to organising your life insurance.
Why do I need life insurance?
How much does life insurance cost?
This depends on a whole bunch of factors, like your chosen policy, your cover, your age, health and smoking status, to name just a handful. A good way to help you find affordable insurance is to shop around and compare similar policies.
Also, it could be a smart decision to purchase insurance while you and your partner are still young. This is because premiums typically become more costly the older you are (‘cause statistically, you are more likely to get ill, injured or pass away as you age… rude, we know).
Advice for new and future parents
Women are often advised to purchase or upgrade their level of life insurance before they fall pregnant, if possible. This is to ensure your premiums won’t be affected by pregnancy complications. But you can of course set this up when you fall pregnant, or after your new bub has arrived.
For new parents
If you’re shopping around for a family life insurance plan, there are a few things you should consider.
- Your family dynamic, ie: the size of your family and how old your children are.
- Work considerations ie: do both parents work, does one make significantly more than the other or is one a stay-at-home parent who cares for the children?
- Protecting your family in the case the unexpected occurs.
What kind of life insurance is best for families?
The type of insurance you need depends on your family’s unique set of circumstances. There is really no one-size-fits-all approach to this thing.
Generally, the life insurance policies you might want to consider include:
Term life insurance
Also known as ‘life cover’ or ‘death cover’, this kind of insurance pays a lump sum in case of death. This sum of money goes directly to the people you have nominated as beneficiaries in your policy.
This might be a benefit listed in your package or can be listed as an optional extra. This generally covers a child for accidental death, and specific illnesses and injuries.
Total and permanent disability cover (TPD)
In case of a permanent disability due to an accident or illness and you are unable to work, TPD provides for you and helps with medical and rehabilitation fees plus living expenses.
If you’re diagnosed with a major illness like cancer, heart disease, stroke, or other life-threatening conditions, then trauma insurance will cover you. Also known as ‘critical illness cover’, this type of insurance pays a lump sum (which is typically used to pay for your recovery or help you reduce your debts).
This pays a portion of your income if you’re unable to work because of illness or injury. The amount is usually based on your annual earnings in the 12 months prior to illness or injury. Income protection is designed to replace your income during this time.
Read more about the different kinds of life insurance policies here.
How much cover do parents need?
According to the Australian Institute of Family Studies (2018), the cost of having children in Australia ranged between $140 and $170 a week (on average), and this number has only gone up in recent years. So, it makes sense that there are a whole host of things to consider when calculating your cover amount like:
- How much you earn (The general rule is that your life cover benefit should payout at least 10x the value of your annual salary)
- Childcare and education
- Daily living expenses
Where to from here?
- For starters, it’s a good time to start or update your Will. You can do this online here in 15 minutes flat.
- Choose the right life insurance policy for your family. If you’re struggling to pick a policy or your questions are trailing off the page, chat with a life insurance expert who can advise you on your protection needs and the best life insurance policies for your family.
There’s so much to think about when it comes to life insurance for families, and there’s no one correct answer! Now is the time to do your research, and of course, If you’re struggling to pick a policy, it could be a good idea to enlist the help of a professional broker to talk you through your options.
Some parting words from us?
Good luck! You can do this!
Need more answers? Read our complete guide to life insurance here.
Disclaimer: The content of this blog is intended to provide a general guide to the subject matter. This blog should not be relied upon as legal, financial, accounting or tax advice.