Life Insurance Coverage Guide

From your independent Australian Life Insurance Broker

How much Life Insurance Coverage (Sum Insured) Do You Need?

The calculation of sum insured is an individual issue and varies accordingly. It will depend on the stage you are at in life. Whether you are single or married, whether you have debt and how much, whether you have a spouse and children who need financial provision made for them, whether you have a disabled child or other beneficiary who may need special needs and particular sums of money ongoing, etc., etc.

The more financial obligations, the more children you have, the more assets requiring protection, previous marriage obligations, bank guarantees, mortgages, growing childrens needs such as university education, sporting costs, new vehicle costs, reasonable lifestyle costs ... the more life insurance that is needed.

Generally, the following outlines are a guide to establish how much cover you will need. We also have a life insurance cover calculator for further assistance in calulating the appropriate level of cover.

Single WITHOUT Dependants and WITHOUT Debt

You will probably need none or very little life insurance unless you wish to bequeath money to somebody special.

Single WITH Debt and WITH Dependants

You will need to provide enough insurance money to pay out all debts. And, you will need to provide income for your children’s continued living and growing lifestyle, including education. Normally, a sufficient lump sum can be provided which can be invested by them, or on their behalf (as set up in your Will or Estate Plan) at a sufficient rate of investment to provide them an ongoing income without using the capital invested.

A simplified example is outlined below:

· If the estimated income required by the family going forward, is say, $60,000 – and the assumed or estimated rate of interest on a lump sum investment is (say) 6% = $1M lump sum is required to provide this amount. ($1M x 6% = $60,000 per year gross. Remembering that taxation will apply to the earnings, so the taxation implication must be considered when doing your calculations, as the taxation will of course reduce the gross amount accordingly)
· If the current debt is, say, $400,000 mortgage + $40,000 owing on vehicle(s) + $30,000 owing on credit card(s) = $470,000 is required to pay out the debts.
· Costs for a funeral need to be considered. Where will the payment for this come from? An estimate of a simple funeral cost, say, = $5,000.

Therefore, a minimum amount of cover required as outlined above would be:

Funds for investment purposes to provide gross
Ongoing income = $1,000,000
Funds to pay out all loans = $470,000
Funding for a funeral = $5,000

Total sum insured = $1,475,000

Disclaimer
All figures and estimates are not to be taken as advice in any way, but are for illustrative purposes only. Please contact us through the contact us page on this web site for further costing information or advice.

Married WITH Debt and WITH Dependants

You will need to provide enough insurance money to pay out all debts. And, you will need to provide income for your spouse, and your children’s continued living and growing lifestyle, including education. Normally, a sufficient lump sum can be provided which can be invested by them, or on their behalf (as set up in your Will or Estate Plan) at a sufficient rate of investment to provide them an ongoing income without using the capital invested.

A simplified example is outlined below:

· If the estimated income required by the family going forward, is say, $90,000 – and the assumed or estimated rate of interest on a lump sum investment is (say) 6% = $1.5M lump sum is required to provide this amount . ($1.5M x 6% = $90,000 per year gross. Remembering that taxation will apply to the earnings, so the taxation implication must be considered when doing your calculations, as the taxation will of course reduce the gross amount accordingly)
· If the current debt is, say, $500,000 mortgage + $60,000 owing on vehicle(s) + $30,000 owing on credit card(s) = $590,000 is required to pay out the debts.
· Costs for a funeral need to be considered. Where will the payment for this come from? An estimate of a simple funeral cost, say, = $5,000.

Therefore, a minimum amount of cover required as outlined above would be:

Funds for investment purposes to provide gross
Ongoing income = $1,500,000
Funds to pay out all loans = $590,000
Funding for a funeral = $5,000

Total sum insured = $2,095,000

The more financial obligations, the more children you have, the more assets requiring protection, previous marriage obligations, bank guarantees, mortgages, growing childrens needs such as university education, sporting costs, new vehicle costs, reasonable lifestyle costs ... the more life insurance that is needed.

Life Insurance Policy Premium Examples

The following tables give you examples of the low relative cost of Life Insurance. Please note that many factors affect your premium incuding the work you do, whether you are a smoker, your age and life insurance coverage / sum insured and should only be taken as a guide.

Factor	Male	Female
Age	35	42
Employment	Management Consultant	Secretrarial / Administration / Office
Smoker	Non Smoker	Non Smoker
Annual Gross Income	$100,000	$80,000
Sum Insured (Death Cover)	$1,000,000	$500,000
Monthly Premium	$53.22	$31.63

NOTE: All figures and estimates are not to be taken as advice in any way, but are for illustrative purposes only.

Further Inquiries

We welcome inquiries on our Life, Trauma, TPD & Income Protection Insurance products and broker services. Please feel free to send us an email, call us on 1300 766 467, use our contact us page to send us an online inquiry or submit a life insurance request quotation, income protection insurance request quotation, trauma insurance request quotation or tpd insurance request quotation form. We will contact you within 24 hours to answer your inquiry.

DISCLAIMER

This web site does not provide financial or investment advice. The information herein is general material and does not take into account your personal and particular insurance, personal, or investment data or objectives or relevant needs. If we can assist with specific advice please contact us.