Why do you need a life insurance

Are you trying to decide if to get life insurance or not? If you are a young adult, you may not see the importance of having it. You might be thinking that it’s too hard to shop around to find one because there are so many options in the market. Honestly, with the amount of online insurance comparison websites available, it’s never been easier to compare life insurance policies. You can easily do it from the comfort of your home and choose an affordable policy that’s best suited to your situation. You can also speak to your superannuation provider and see what they suggest.

Here’s why you shouldn’t avoid life insurance any longer

You are under 30 years old.

If you’re under 30, you may not yet have a family who relies on your support. However, you might have a mortgage and plenty of other bills to pay, and you may be at the age where starting a beautiful family might not be so far away. Life insurance rates usually increase with age. So, locking in a policy when you are younger will be one of the smartest things you can do for your future. Term life insurance provides a lump-sum payment to pay the debts mentioned above if something tragic happens. This means you’ll have access to more money for your loved ones at a lower monthly rate. In general, insurance rates increase 10% every year.

You have a family that rely on you.

We play different roles at different stages of our lives. Sharing our life with loved ones often means sharing not only the good times but the debts and all of those other responsibilities. We have life partners, kids or parents that rely on us financially. If you were to die or become terminally ill, what sort of financial situation do you think they’d be left with? Do you think they will be able to pay off all your commitments?

If you are the main provider for your family, without your income coming in every week/month they will likely struggle to keep up with day to day expenses. Your life insurance policy can be there when you can’t.

You run a business that can support your family.

Having life insurance isn’t the only way to keep a business going when the owner passes away, but it will make a big difference in tying up all the loose ends. Death of the owner plays a huge part in businesses shutting down. It doesn’t matter what sort of business you operate, having life insurance is something you should seriously consider.

The money received from life insurance could help your beneficiaries pay off any existing loans. They may be able to become a silent partner by funding your existing partner/s if they want to carry on. Or they could potentially buy the business off your existing partner/s and get the business under control.

Basically, life insurance can give your beneficiaries the option to continue your business with much less financial burden.

How much life insurance should you get?

The answer to this question is predominantly based on how much money your family will need to cover expenses when you’re no longer there.

This is how I usually work it out:

  • What are your annual expenses and how much of those are covered by your salary?
  • How many years are there between when you buy your policy and your retirement age?
  • Calculate a cover level that will cover costs for those years.

For example, if you get life insurance at age 35, you’d want your family to be covered for the next 25 years. So, if your family’s annual expenses come to a total of $30,000 you would want to be insured for at least $750,000.

Remember, the earlier you get life insurance, the better deal you’ll likely receive!

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