Insurance – How much do I need?
Whether you’re considering life, trauma, income protection or TPD insurance, if you’re the breadwinner, you will want to keep your family in the style to which they have become accustomed. If you’re a housewife/househusband, then you will need to provide money for someone to do the things you did if you’re not around or incapacitated.
Insurance – Some factors to consider in deciding how much cover:
- How much money might be needed in order to pay off your debts?
- How much money would your dependents need to continue to live with the same lifestyle they are currently enjoying?
- Life Insurance – As an approximate rule of thumb, when insuring yourself for life insurance you should consider insuring your life for between 5 and 10 times your salary.
- Trauma, Disability and Income Protection – When insuring yourself for trauma, disability or income protection you should consider insuring yourself to produce around two thirds of your earnings or $50,000 for professional care each year.
- How much can you afford to pay?
Insurance – Cost as a driving factor in the decision process
For many, cost is a primary consideration. It’s a question of affordability versus what you need.
Ultimately, how much money you and your family needs will vary from household to household, so it’s up to you to decide how much money should leave your family with a reasonable standard of living.
A better question when considering how much insurance to take out is ‘How much cover can I afford?’. For example, $35 a month will buy a non-smoking 35-year-old male office based worker approximately $500,000 of life insurance. You may need $1,000,000 but if you can only afford $500,000, its better to have something than nothing at all.
One thing is clear: Australians are massively underinsured, unless you have accumulated so much wealth that you can afford not to work and pay for professional care from tomorrow, you have a need to insure yourself and your family.