When is the best time to buy life insurance? Are there certain life stages when life insurance is more important?
While we generally grow up anticipating a long and productive life, things happen in every home and family that makes us reassess.
Research from award-winning life insurance company NobleOak shows people commonly buy life insurance after life changing events such as marriage, new babies, unexpected illness, accidents, or grief.
When should you get life insurance?
Before you need it! Life insurance can’t do you much good if you only get a policy after something has already happened to financially affect your family.
It’s recommended that everyone reviews their level of life insurance cover whenever they experience a change in income levels, or change in life stages. We examine life insurance needs for different life stages in detail below.
There are many reasons why you might need life insurance, and different types of life insurance cover can provide financial security for life’s various challenging events:
- Term life insurance (also called death cover) can provide a lump sum if you pass away or are diagnosed with a terminal illness.
- Total and permanent disability insurance (TPD) can provide a lump sum if you become disabled and are unable to work.
- Trauma insurance (also called critical illness or injury insurance) can provide a lump sum if you experience a medical trauma such as cancer, heart attack, or the loss of a limb.
- Income protection insurance can provide a monthly payment up to a certain percentage of your usual income if you are unable to work for an extended period of time due to serious illness or injury.
Read on to find out the life events that most commonly prompt people to sign up for life insurance, and the times when you can most benefit from having life insurance at different life stages.
When do people get life insurance?
NobleOak’s research shows the five life events which most commonly prompt Australians to take out a life insurance or income protection insurance policy are:
- Marriage or divorce
- Buying a home
- Having a child
- Emergency experienced by close friend or family member
- Your own illness or trauma
1. Marriage or divorce
When you marry, you take on shared financial obligations. For this reason, ASIC recommends that newly married couples take out adequate life insurance, as well as writing a will and getting your superannuation in order.
Later in life, if divorce occurs, both parties can be left with a depleted income. Life insurance is an effective way of protecting your dependants against an uncertain future in the event of your death.
2. Buying a home
This is often a time to reassess your life insurance needs. When buying a house, accessing your first home loan, or increasing your mortgage, you can’t afford to leave yourself or your family unprotected.
Who would pay the mortgage if something happened to you or your partner? Could your family afford to pay off the mortgage and pay for funeral expenses without either of you?
3. Having a child
Many studies have shown that having a child is a popular trigger to take out life insurance. When you start or grow your family, you should ensure you have adequate life insurance in place.
This is important no matter what your family’s situation – obviously the breadwinner should be covered, but so should a stay-at-home parent. Without a stay-at-home parent, the remaining parent would likely have to pay some expenses for childcare and domestic help such as cooking and cleaning.
You may have life insurance in your super, but is it enough to cover the additional cost of bringing up a family if you’re not there? Most superannuation life insurance policies cover a much lower benefit amount than standalone life insurance policies.
Income protection insurance can also be an important addition to your financial cover. It can provide a certain amount of your usual income if you were unable to work for an extended period of time due to injury or illness.
4. Emergency experienced by close friend or family member
When illness, injury, or accident strikes a dear friend or loved one, it’s both a shock and a time to reassess your own financial protection.
Common chronic diseases such as heart disease, dementia, cancers, asthma, and diabetes are the leading causes of death and disability in Australia, creating a high burden for families and carers.
Trauma insurance can provide a lump sum payment to you and your family if you were to suffer a range of specified illnesses or injuries including cancer or a heart attack.
Meanwhile, total and permanent disability insurance (TPD) could provide a lump sum payment to you if you were to become disabled so that you were unable to work to provide for your family anymore.
5. Your own illness or trauma
Your own illness or incapacitating trauma is the final – and perhaps most understandable – trigger for getting life insurance.
None of us wants to think about developing a serious illness, dying, or becoming totally and permanently disabled until something happens to show us that we are not 100% in control of these possibilities.
Find good quality life insurance before you need it
Using the Canstar website, you can compare policies for term life insurance (also called death cover), total and permanent disability insurance (TPD), trauma insurance (also called critical illness or injury insurance), and income protection insurance.
If you’re not sure how much life insurance cover you need, you can use the Canstar Life Insurance Calculator to work out an estimate for term life cover, TPD cover, trauma cover, and income protection.
Life insurance for different life stages
Applying for life insurance is a personal decision and is something we don’t often put on our priority list, but there are certain times of life when it is especially useful to have life insurance.
Having life insurance at these various life stages represents part of good financial planning, and may even be recommended by your financial planner. Thankfully, Canstar can help you compare life insurance policies to find the right cover for your situation.
Young single person
Young single people might first think about their need for life insurance when they are…
- Kick-starting their career and landing their first job
- Taking out a car loan or a personal loan
- Finding the love of their life and about to tie the knot
Young couple
Young couples are wise to look for life insurance when they are…
- Buying a home and a mortgage to go with it
- Paying off personal debt such as credit cards or personal loans
- About to start a family
- Enjoying a new pay rise
- Planning to send the children to school or university (find out the average cost of public vs private school, and which uni degrees are most expensive.)
Young couples should also keep in mind that if they are planning a family, it’s also time to review their health insurance, as pregnancy- and birth-related costs are not covered by some policies!
Mature couple
An established couple may check their life insurance cover when they are…
- Renovating the house by increasing their mortgage or using a redraw facility or offset account
- Increasing their debt to purchase an investment portfolio or rental property
- Looking after physically or financially dependent ageing parents
- Recently divorced or widowed
- Planning to leave an inheritance for children or grandchildren
Self-employed
Self-employed people should always plan to have life insurance to care for their family in case they are unable to run their business for an extended period of time. Life insurance can be especially useful for self-employed people when they are…
- Paying fixed expenses such as rent, lease payments, and phone bills
- Taking out a business loan to purchase a commercial building, equipment, etc.
- Going into business with a new partner
- Relying on key staff within the business for profitability
Whether you seek your own life insurance directly from an insurer or seek advice from a licenced financial planner, it’s up to you to take action at the appropriate times in your life.
Here at Canstar, we offer a free comparison service to put you in touch with the life insurance company who offers the policy that best matches your needs. Simply click below to begin the simple, quick, obligation-free process.
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