As new research shows, a lack of understanding leaves many people dicing with financial disaster, money experts say life insurance is the simplest way to protect your loved ones.
A comparethemarket.com.au survey of 1100 Australians without life insurance has found that more than one-third of people with children acknowledge that if they were no longer around, their partner would not be able to pay the bills and maintain the family lifestyle.
More than half said they did not have life insurance because it was too expensive, 19 per cent never thought about their death, and 12 per cent thought it was only for wealthy people.
“Life insurance can cost less than $50 a month and can pay out a $400,000 lump sum,” says Compare the Market spokeswoman Abigail Koch. “Comprehensive car insurance for $40,000 often costs more than $50 a month. With this in mind, it's surprising more people don't take out life insurance given its benefits.”
Koch says the first step to a safety net is talking with your partner about how you would cope if they were not around, then understanding your household budget and trimming excess spending to help build a savings buffer, and also considering life insurance.
“One in five families face the death or illness of a parent leaving them unable to work,” she says.
“Life insurance can be incredibly affordable if you live a healthy lifestyle.” You can cut the cost of life cover by not smoking and staying in shape.
Insurance through super means you don't pay for it with household income, but it does reduce the money that's building your nest egg.
A new report by the Financial Planning Association and Zurich says three out of five Australians have term life insurance cover, and more than 60 per cent of that is held in super.
Some insurance is better than no insurance, but there would be people underinsured to the point that if something happened to them their family would have to sell the family home to survive financially.