7 times you might wonder: do I need life insurance yet?

Tuesday 23 October 2018

Article by Kelly Emmerton

It’s one of life’s greatest mysteries: when should you take out a life insurance policy? The reason there’s no clear answer to this question, is because it’s different for everyone - if you need life insurance and when you buy it will depend on your personal circumstances.

7 times you might wonder: do I need life insurance yet?

But to help you figure it out, we’ve gone through 7 times when you might wonder if having a life insurance policy is the right fit for you.

Do I need life insurance at 18?

At 18, you suddenly become an adult - you can get your full licence, drink, vote and make all kinds of decisions for yourself. And with adulthood comes life insurance, right?

Well, not always. Whether or not you need a life insurance policy once you turn 18 will come down to your individual circumstances. You likely don’t have any dependents or major financial commitments to worry about yet, so having life insurance this early is often unnecessary.

Do I need life insurance at 25?

Think about it this way: if you’re 25 with a mortgage and a young child, then yes, taking out a life insurance policy might be a good idea at this stage. On the other hand, if you’re 25, rent your home and don’t have a family relying on your paycheck, you can probably wait a little while longer.

Do I even need life insurance before I’m 30 then?

Generally speaking, you should have life insurance before you take on any major financial commitments - like a mortgage or large personal loan - or before you have other people relying on your income, such as a spouse or kids. For many people, this time often comes in their 30s so many people start looking at life insurance at that time. But your situation may be different, so it’s up to you to make a call about when you need the added security of a life insurance policy.

One of the benefits of buying life insurance earlier in life is that it's often cheaper that way - life insurance premiums tend to go up as you get older, while the maximum pay out tends to go down as you age.

Life insurance later in life

Do I need life insurance after 60?

Generally speaking, you rarely need to buy a life insurance policy once you turn 60, and for most people, you may not even need to keep an existing policy. If you’re retired, your mortgage is paid and your kids have left home, you probably don’t need to keep up your life insurance policy, unless:

  • Your spouse, children or other dependents rely on your pension to get by. If the loss of that income would make life hard for your family, a life insurance policy can fill the gap.
  • You still have debts to pay off. Hopefully by the time you reach this age you’re debt free, but if you have a lingering credit card balance or part of your mortgage left to pay, a life insurance policy can help make sure your family isn’t left to foot the bill.
  • You want to leave it as an inheritance. Some Aussies keep up their life insurance policy so that when they die their family will have the payout as a kind of inheritance. But remember, this is only a good strategy if continuing to pay your premiums won’t put strain on your retirement budget.

Life insurance for big life events

Do I need life insurance before I have a baby?

Deciding to have a baby is exactly the kind of major life change that should make you consider taking out a life insurance policy. A baby is a big financial commitment - in fact, Mozo research shows that 70% of new parents feel the pinch in a baby’s first year, and that’s without even mentioning the lifetime cost of raising your kids.

Having a life insurance policy and the right level of cover before you have your first child means that if something happens to you, your new family won’t be left in the lurch financially, so before you have a baby is a great time to start comparing your life insurance options.

Do I need life insurance before I take out a mortgage?

While there’s no rule that says you need to have a life insurance policy when you apply for a home loan, it can be a good idea. Like a baby, a mortgage is a massive financial commitment - one that you don’t want to dump on anyone else, should something happen to you.

A life insurance policy can go a long way to paying off your mortgage debt if you die, which will be a relief for your family.

What happens to life insurance after divorce?

Married couples often name each other as beneficiaries on their life insurance policies - but what happens once you seperate? The important thing is to check on the state of your life insurance after your divorce and make sure you update the beneficiary on your policy.

Often, you’ll come to an agreement about life insurance in the divorce proceedings - you might agree to keep your ex-partner as beneficiary, so they can use the money to raise your children if something happens to you, or you might decide to make your children beneficiaries instead.

Is it time you took out a life insurance policy? Head over to check out some of your options in our life insurance comparison tool.

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