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Do I need life insurance?

Whether you’re young or old, married or single, have children or don’t, take a moment to consider how life insurance fits into your financial plans.

To decide whether you need life insurance, just think through the worst case scenario. If you were to pass away tomorrow, how would your loved ones fare financially? Would they have the money at hand to pay for the mortgage or other loans? Would they be able to meet on-going living expenses? If someone depends on you financially, chances are you need life insurance, because if you were no longer there to provide for your dependants, the financial implications for them could be considerable.

What’s more, many people think that arranging life insurance is a complicated and expensive business. That’s probably one reason why recent research1 suggests that nearly 6 in 10 parents with children aged 17 and under may have insufficient life insurance cover leaving their families potentially exposed in the event of their death. It’s a disturbing statistic when you consider the impact on your family if they are left without financial support.

Use our Life Insurance Calculator (below) to help determine how much insurance you may need. It should take less than 5 minutes!

1. Source – Newspoll Life Insurance Study – December 2009.

Life Insurance Calculator

How much cover do I need?
Use this simple self-assessment calculator to work out the amount of cover you need:

Step 1 of 3:

Loans and Debts

Mortgage:
(e.g. $150,000)

Other Loans:
(e.g. $10,000 for Personal
loans, car loans, credit cards)

$


$

Lump Sum to clear loans & debts: $0

Life Insurance Calculator

How much cover do I need?
Use this simple self-assessment calculator to work out the amount of cover you need:

Step 2 of 3:

Monthly living expenses

Rent / Mortgage repayments:

Vehicle & transport:
(e.g. Fuel, bus/train fares, tolls)

Your home:
(e.g. Rates, electricity, water,
gas, insurance)

Food & general living costs:

School fees / child care:

Other:
(e.g. Entertainment, clothes
personal grooming)

How many years do you want to
cover these expenses?

$

$

$

$

$

$



     

Monthly Total:

Yearly Total:

Approximate Value of Future Yearly Expenses:

$0

$0

$0

Life Insurance Calculator

How much cover do I need?
Use this simple self-assessment calculator to work out the amount of cover you need:

Step 3 of 3:

Final Totals

Loans and Debts plus
Future Yearly Expenses:

Value of life insurance
or assets that can be
quickly turned into cash:

$


$

Total debt & expenses
to be covered:

This is the amount of
cover you may need

$0

This Life Insurance Calculator acts as a guide only and should not be taken as insurance advice, or a substitute for seeking professional guidance. It does not take into account your personal circumstances or total financial needs.


Did you know?

40% of Australians would sell their primary residence if the main income earner passed away – sacrificing the great Aussie Dream that they have worked towards their whole life.

ING Survey – Underinsurance. 2008

How much life insurance is enough?

Of course, if you’re going to buy life insurance it’s important to make sure you’ve got enough.

But, how much cover is enough? Some financial planners say you need enough insurance to replace five to seven years of your salary. They also say that if you have young children or significant debt, you should bump up your coverage so you have enough to replace as much as 10 years of your salary. That means a person making $50,000 a year should have anywhere from $250,000 to $500,000 worth of cover or more.

Whilst that may sound like a lot of money, remember, most people want enough life insurance to make sure their family can continue to live their current lifestyle even if a breadwinner passes away.

Here are some questions to consider when deciding how much insurance you may need:

  • How much money will be needed for your funeral?
  • How much financial support will your dependants need?
  • How long will they need this level of financial support?
  • Do you have any once off obligations, such as a mortgage, a car loan or credit card debt?

Factors to consider include whether your surviving partner will have childcare expenses or school fees to take care of. Do you have other assets on which to draw? Many people also believe that they are covered through their Superannuation, but the fact is in most cases it’s simply not enough. So check your cover under your Super, and make sure you’re adequately covered.

The bottom line is - buy enough insurance to meet your personal needs.


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