The answer to this question will be different for everyone. Similarly to when we are buying a new car. What we need the car to do dictates what type of car we will buy. A young family ideally need boot space for a pram and school bags, so a two-seater sports car might not be appropriate.
To understand how much life insurance you need, first remove yourself from the equation. It might be morbid, but imagine you died yesterday:
- List all of the things your family would have to pay for:
- Mortgage, other debts, costs for your children, general living costs and a funeral.
- Would you like your partner to be able to take time off work to grieve? Include how much they would need to replace their salary.
- Will your family need a lump sum of money they can invest to help replace your income? Include how much they would need to replace your salary.
- Will your partner need someone to help around the house or with the children once they do return to work? Include the cost for a housekeeper/nanny.
- Don't freak out, this figure might be quite high.
- List all the assets or income your family would have access to. This will reduce the figure above:
- Superannuation, shares and savings.
- Is there another source of income your family could depend on if you weren't around?
Once you understand how much insurance you need, it is also important to consider what you can afford. Having more cover provides you with more protection. But having more cover also means more cost.
I have life insurance as part of my super, is that enough?
Most of us have a default level of insurance within our super funds. In most cases there is often a set level of cover applied to all people in the super fund, sort of a 'one size fits all' approach. Having some cover is better then none at all, however if you are paying for cover it is important that it meets your needs.
How do I increase my life insurance?
Before you increase your cover, be sure you understand how much the premium will increase. You can contact your existing insurance provider to increase your life insurance. In some cases, you will go through an assessment of your health before they approve an increase.
Alternatively you can contact the Caboodle Advice team for assistance. We can help clarify whether there is a better or cheaper policy with another company as well assist in any administration involved with increasing the cover.
To find out more simply give us a buzz at Caboodle Financial Services :
Phone: 1300 652 944
WARNING: I know I don't need to say this, but this information is not tailored to your personal situation. It is designed to be of a general nature and get you headed in the right direction. It therefore hasn't taken into account your personal objectives, financial situation, or personal needs.
You therefore need to either assess whether it is appropriate to your personal situation on your own, or ask an adviser to provide advice that is tailored to your personal situation.