Do I Need Life Insurance?

“Do I need life insurance” is a common question to ask. The answer, however, isn’t always so simple.

The world of life insurance can be complex to navigate, which is why we’ve taken this opportunity to break it down for you so you’re well equipped to make an informed decision about whether life insurance is right for you.


What is Life Insurance?

Before asking “do I need life insurance?” or “how much does life insurance cost?”, you first need to understand what life insurance is. The overall goal of any life insurance policy is to ensure your loved ones are financially secure if you pass away unexpectedly.

If you do pass away while you have a life insurance policy in place, the people you nominate as beneficiaries receive a monetary benefit so they can continue to maintain the same standard of living.


What’s the Difference Between Permanent and Term Life Insurance?

In Australia, term life insurance policies is the most common type of life insurance. Term life insurance policies typically expire at age 99 (some don’t expire at all) and there is no ‘cashback’ or ‘surrender’ value. As well as this, there are some other types of life insurance which are generally very hard to obtain in Australia, they include:

Whole life insurance –Includes an investment component which allows the death benefit amount to remain at a level premium.

Variable life insurance – Allows you to modify terms and investment options and adjust the frequency and premium paid in each period.

Universal life insurance – Premiums are flexible and can be adjusted to suit your financial situation.


What Should I Consider When Deciding If I Need Life Insurance?

A number of factors need to come into play when deciding if life insurance is right for you and they include age, life events, financial obligations and financial dependents. All four of these elements should play a part in your ultimate decision.


As you grow older, build your wealth and begin securing your retirement, the need for life insurance grows. Because younger people often have fewer financial obligations, many are unlikely to need life insurance.

But the older you get and the more expenses you acquire, the more vulnerable you become without life cover in place. However, this doesn’t mean life insurance isn’t only for mature people. In fact, life insurance can apply to every adult no matter their age, but your decisions for purchasing life insurance at 25 to 35 will be vastly different from someone who is 55 to 65.

A 25 to 35-year-old may have some short-term debts, a mortgage, as well as a partner and young children support. At 55 to 65, life cover may be needed to help pay any outstanding mortgage, investments or they may be saving for a retirement fund.

Life Events

Rather than age, life events will factor much higher in your decision to purchase life insurance. When life insurance should be purchased and the level of cover you choose will depend largely on key life events. Some of the biggest life events that may prompt you to invest in life insurance include:

  • Buying a house
  • Getting married
  • Having children
  • Investing in property
  • Saving for a retirement fund

Financial Obligations

As you live life, your financial obligations are bound to pile up over time including living expenses, loans and investments. If you have any outstanding debts, who’s responsible for paying off those debts when you’re no longer here?

All the costs of living you’re currently paying to support your family will suddenly become a heavy weight on their shoulders when you’re no longer around to provide for them. The more financial obligations you’re tied to, the more likely you will need life insurance to ensure the financial security of your family in the future.

Financial Dependents

The most common reason people take out life insurance is because they have dependents that rely on them financially such as a partner or children. If you were to pass away, it may be difficult for them to continue on with the same standard of living if your income is no longer there to provide for them.

The larger your house and the more children you have, the higher level of cover you would likely need to cover the expenses. Even if you don’t have any children, your partner may still find it hard to adjust to maintaining the usual household payments, especially if you are the primary income earner.


How Much Does Life Insurance Cost?

The cost of life insurance will vary greatly depending on your age, health and life situation. As we grow older, the likelihood of death increases, and because of this, the cost of life insurance increases every year. With the additional costs of life insurance adding to your other long list of expenses, it’s not hard to realise that serious consideration needs to be made before making this investment.

Despite the increasing costs, the end goal is what you need to keep in mind. The whole reason for buying a life insurance policy is to have benefits paid upon your death to ensure your loved ones can maintain a high quality of life, so take your time to work out the monetary impact on you and your family if you were to pass away suddenly.

To gain a better understanding of life insurance costs, we recommend using our life insurance calculator or speaking with one of our advisers to answer how much does life insurance cost for you.


How Much Life Insurance Cover Will I Need?

Take the time to crunch the numbers and work out how much money your family would need to cover ongoing living expenses, pay for existing debts as well as medical and funeral expenses. Remember to also take saving, superannuation and assets into account which could contribute towards covering some of these expenses.

By adding up all your expenses and subtracting any money or assets that could be used to offset these costs, this will provide the sum required to cover your current financial obligations.


Life Insurance Comparison with Cover Australia

At Cover Australia, we do everything we can to help you decide whether life insurance is right for you. Not only do we deliver a comprehensive comparison service where you can compare life insurance policies with ease online, but our team of qualified advisers can also be contacted over the phone to provide you with honest advice.

We’re more than happy to help you choose the right life insurance policy for you. Visit our website to compare life insurance or call us today on 1300 366 817.

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