How Much Life Insurance Do I Need

How Much Life Insurance Do I Need

Talking about life insurance coverage is never a nice thing to do. Who wants to really talk about the fact they might actually die? It’s an important discussion to have with your family though, as you want to make sure they will be protected financially in case the unexpected happens to you. Before you buy life insurance, you need to know how much life insurance you actually need, then compare life insurance to find the best value life insurance for your needs. Below is some handy information that can help you understand how much life insurance you actually before you start the process to buy life insurance.

What is Life Insurance?

‘Death cover’ is another name for life insurance. You can purchase a life insurance policy which will pay an agreed lump-sum should you pass away. Essentially, it is designed to replace the income you would have earned. Therefore if you’re gone, your family can still meet their financial obligations.

There are also other elements of life insurance which are definitely important as well, including Income Protection, Total Permanent Disablement (TPD) Insurance and Trauma Insurance. Read all about life insurance here.

Should You Buy Life Insurance?

There are many reasons why you should buy life insurance. For starters, you will be secure in the knowledge that if something happens to you, you and your family will be protected financially. Secondly, your family’s financial commitments will be covered in the future should something happen to you.

However, before you compare life insurance and get the best life insurance policy in Australia for your needs, various factors need to be considered (including the below). Also to consider is items such your life insurance term and life insurance coverage.

So, I’ll Buy Life Insurance – But How Much Do I Need?

After you’ve decided you want to buy life insurance , the next step is working out you how much you need. It can sometimes feel like ‘how long is a piece of string’ but the key here is balance, and understanding your actual family need. You need enough life insurance so you, or your family, can cover your financial commitments after you’re gone or you can no longer work because of something bad that has happened to you. Don’t forget the best way to get the best life insurance policy in Australia for your needs is to regularly compare life insurance through Billy Explores.

If you’re underinsured or don’t have the right life insurance term, you or your family might be left in the lurch and struggling to pay bills without your income. But on the flip-side you don’t want to buy life insurance and pay for life insurance coverage or premiums you don’t need. Of course, don’t forget at any stage you can always compare life insurance and get the best life insurance policy in Australia from our panel of providers that is just right for you and your family’s needs.

There’s a general “rule of thumb” method for working out approximately how much life insurance coverage you really need so that your life insurance payout can replace your income if you pass away or can no longer work. To start, write the down all the answers to the below:

  1. What is your income each month?

Firstly, write down how much you and your family actually earns each month. This is the basis of all future income requirements to meet your commitments.

  1. How much do you spend on living expenses each month?

Grab your bank statements and then itemise all of your costs. This includes rent (but not mortgage), groceries and power bills, school fees through to phone plans. Write down all of your spending, which will then give you a monthly figure. For example, $2,000 monthly spend – this is called your living expenses.

  1. How much do you owe?

Write down any debt you’re paying off. Things like a mortgage or car loans are easy, since it’s a set monthly repayment for a specific number of years. Other debts like credit cards are harder, because they can rise and fall as you spend, and it’s not as easy to know how long you’ll have to cover that debt for.

  1. What is your family savings plan?

Your family savings plan also needs to be included. There are two reasons to talk about this: on the one hand, the more you have saved, the less your family will be reliant on any insurance payout to meet financial commitments and general living expenses. That also means you can opt for a lower level of life insurance coverage and pay lower premiums.

On the other hand, if there your family savings plans are working towards any savings goals, you may need to add that into your life insurance coverage and payout – for example sending your kids to university or helping them with their home deposit.

Calculate How Much To Buy – Life Insurance

So we’ve got all of the information above, now you need to know how much life insurance coverage you need. As a general rule of thumb, follow the below steps:

Step 1: Add the following items above to calculate what your financial commitments are:

  • Your annual salary multiplied by the number of years you want to replace that income
  • Your mortgage balance and another other debts
  • Any future living expenses such as school fees, university fees, travel and funeral costs.
  • Family saving plan
  • The cost to replace services that a stay-at-home parent provides, such as childcare, if applicable.

 Step 2: From that total, subtract any liquid assets you have, like savings or share portfolios, and current life insurance policies.

The dollar number you’re left with is the amount of life insurance you should buy as part of your life insurance coverage.

When Is The Best Time To Buy Life Insurance?

So, we’ve figured out how much life insurance you actually need, but when is the best time to buy life insurance? The answer is entirely up to you and your family’ financial commitments, and how much premiums you can afford to pay.

You can generally get life insurance a policy up until you’re about 65 years old, and get life insurance coverage up until you’re 99. But remember: life insurance premiums get more expensive as you get older and the shorter the life insurance term, so thinking about life insurance earlier is a good idea. And of course, you can regularly take the opportunity to compare life insurance in Australia through Billy Explores! You can save time and effort no matter your age, and get the best value life insurance in Australia from our panel of providers that’s perfect for your needs!

Life Insurance Comparison In Australia

So, you’ve got all the information and now the next step is to compare life insurance providers and get the best value life insurance policy in Australia that is perfect for your and your family’s needs from our panel of providers! They will help you get the best life insurance term and life insurance coverage for your needs. All you need to do is provide some basic information and let Billy Explores awesome team do the rest!

  • Should I Buy Life Insurance?

    It is entirely a personal decision whether you should buy life insurance or not, however if you want to feel secure in the knowledge that you and your family will be able to meet your financial commitments should the unexpected happen, then it’s a great idea.

  • I Want To Buy Life Insurance - How Do I Compare Life Insurance in Australia?

    The easiest way to buy life insurance and get the best value life insurance for your needs is to compare life insurance through Billy Explores! Our panel of providers will be able to help you compare their life insurance policies, and get you the best life insurance coverage for your needs.

  • How Much Life Insurance Do I Need?

    You basically need enough life insurance to cover your financial commitments like a mortgage and living expenses should you no longer be able to earn any money due to a trauma or pass away.