The True Cost of Not Having a Plan

We’ve all heard the line about how important it is to have life insurance, to make sure your loved ones are looked after and that the future is planned for.

But what does it really mean to have life insurance? Is it just an extra cost going towards an intangible thing that you’ll never really need?

Earlier this year, ANZ Wealth and Ipsos Australia conducted a study into the impact of a parent’s death on their children and partner. Other than the devastating emotional impact, the study found that the financial impact on many families was just as distressing, with 47% of parents without life insurance rating their financial position after a partner’s death as ‘Struggling’.

When compared to families with life insurance, 56% of parents covered by insurance rated their financial position after a partner’s death as ‘Adequate’. This highlights the crucial role of life insurance on the home life, financial stability and mental wellbeing of children and their families after a parent’s death, the study broke down the very real costs of not planning for your future.

For example, a third (33%) of parents without insurance had to move house due to financial pressure, while half (50%) of the children whose parents didn’t have insurance felt that they were not financially supported as well as they could have been. This is compared with 36% of children covered by insurance who agreed with that same statement.


“My mother had to have boarders to help make ends meet”


These heartbreaking words came from an interviewee who took part in the study, and whose family was not covered by life insurance after one parent died.

Many families were forced to make drastic lifestyle changes to try and achieve financial stability, with 1 in 10 parents taking a second job and 1 in 3 children over the age of 14 taking on a job within 2 years of their parents’ death just to help with household finances.

The financial strain is a heavy burden to bear. Homes lives were heavily impacted, with almost half (49%) of children taking on more responsibilities caring for siblings, and 67% taking on more household chores and tasks.

Furthermore, more than half (53%) of children whose parents weren’t insured reported a decrease in family outings and a third (33%) reported a decrease in overall time spent together as a family.

Death has an understandably damaging impact on children, but with the added financial pressure then faced by the whole family, the effect is hugely intensified.

Many children had to move house and change schools, disrupting their education and social life. 41% of children saw a worsening in academic performance and 46% lost contact with some friends, while a little more than half (51%) of parents would have liked to be able to provide their child with better educational opportunities.

One interviewee sadly reported “a devastating emotional effect” and “an enormous workload upon me for many years” after losing their mother at a young age. In a number of cases, the social and emotional impact on children further developed into a mental health condition or drug/alcohol abuse as they went through adolescence.


How life insurance can help

While there isn’t much you can do to prevent or prepare for the emotional heartache and inevitable flow-on effects that children experience when they lose a parent, life insurance has proven to be incredibly helpful in dealing with the sudden financial pressure placed upon the whole family.

It protects against the impact of the unexpected, and makes it easier to maintain your lifestyle if something were to happen. Having a plan for the future can help pay for your children’s school fees, your mortgage and daily living expenses, and as a result, ease the financial stress, allow you to stay in your family home, and reduce the likelihood of disruption and upheaval in your children’s lives.

If they can stay in the same school, surrounded by their friends and a familiar lifestyle, they will have the best chance possible of getting a good education. Having enough life insurance may also allow parents to spend more time with their children, raise them in their family home and give them the support they need to deal with the loss in a constructive, healthy way.

It plays a valuable and very important role in helping both children and parents after a death in the family. In fact, according to the study, 75% of families without a life insurance policy agree that in hindsight, having cover would have helped.


Over 40% of families had no warning prior to the death

In a lot of cases, death comes unexpectedly. 64% of families had less than a week’s notice of their partner or parent dying, which meant having to deal with a huge amount of sudden emotional stress and suffering.

The last thing anyone would think about in such a situation is finances, which is exactly why it’s so important to think about them beforehand. If there’s anything that can be learnt from this study, it’s just how crucial life insurance is to help a family pick up the pieces after the death of a parent.

Planning for your long-term financial future is something every family needs to do, and that includes preparing for the possibility of losing a parent and the contribution they make to the family. While life insurance won’t be able to ease the pain and grief of losing a loved one, it can make stabilising your home life a little easier by making sure you’ll have the funds to protect your family’s future.

Death is a natural part of life, and it needs to be discussed – so have the conversation.


This blog was written according to research in ‘Impact of death and disability on Australian families’ from the 2015 edition of New Perspectives magazine, as reported by Covered Magazine

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