Do you have enough life insurance?

Many people in Australia do not have enough life insurance to sustain their current lifestyle if misfortune were to impact their family.

A survey conducted for the Investment and Financial Services Association by Rice Walker found that only 4% of those with dependants have sufficient life insurance. This has the potential to greatly affect families who aren't covered if one parent were to die (1).

How much life insurance is enough?

So how much life insurance should you have? Sufficient life insurance is generally accepted to be at least 10 times the insured's earnings. But alarmingly, six in ten people with dependants don't have enough life insurance cover to look after their loved ones for more than one year if they were to die (2).

These alarming results could be due to a lack of awareness about the types of life insurance solutions available and the cost of purchasing cover.

Many people insure their home and their car, but fail to insure their most important asset, their life. People fail to realise the value of their life in monetary terms, and what the loss of their life would be to their family.

Affordable life insurance

Let's dispel some of the myths around life insurance costs and to highlight not only just how affordable life insurance premiums are, but also how invaluable life insurance benefits are.

Many people are surprised to learn just how affordable life insurance is. Some types of life insurance are available from as little as 70c per day. With one life insurance company is Australia $1 per day buys a 35 year old female $901,743 of Term Life Insurance and a 35 year old male $551,064 of Term Life Insurance. Term Life Insurance pays a lump sum if the insured dies or is diagnosed as terminally ill.

But if you really want to put a dollar value on your health, think about the costs involved when you don't have life insurance. A cancer patient, on average, is admitted to hospital 5 times, uses outpatient and accident and emergency services 21 times, visits a GP 26 times, uses medical services outside hospital 36 times and has 14 prescriptions filled (3). A year's supply of some cancer drugs can cost up to $60,000 a year.

Review your life insurance policy regularly

Those with life insurance, but who have not updated their policy recently are also at risk. Life changes such as marriage, the birth of a child, or purchase of a house all impact your life insurance needs.

How much life insurance you need will vary, but you will want enough to protect yourself, and your loved ones from financial hardship. It is one of the easiest steps you can take to ensure that misfortune does not impact those who depend on you.

References:
1. IFSA-Rice Walker Fast Facts: a nation exposed!
2. IFSA-Rice Walker Fast Facts: a nation exposed!
3. Health system expenditures on cancer and other neoplasms in Australia 2000-2001, Health and welfare expenditure series no 22, Australian Institute of Health and Welfare May 2005, www.aihw.gov.au

Source: Asteron 2010

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December 2010