Life insurance is designed to meet the personal needs of you and your family, so it’s impossible to predict how much cover you should take out. However, some careful planning and budgeting will help you narrow down a figure that may be enough to meet the needs of you and your loved ones, especially as you get older.

Your ideal cover amount should be based on:

  • your future plans, and family’s living costs
  • your assets and personal savings
  • your debts (the amount owing on your mortgage, loans and/or credit cards)
  • any other income your family will have access to when you pass away (superannuation, other forms of insurance etc).

The MoneySmart life insurance calculator can help you add up your personal variables and find an estimated cover amount for you. If you’re still not sure or prefer a more detailed analysis, you can speak to a financial advisor.

Life insurance needs by age and circumstance

Our needs constantly change as we get older. In fact, one of the upsides of our age is that we’ve had more time to build wealth and learn from those expensive choices we may have made in our 20s. The great thing about life insurance is that you can factor in these changed circumstances into your policy, to make sure you’re adequately covered or not paying for cover you don’t need. 

Life insurance needs by age

Here are some things worth considering depending on which age bracket you have climbed to:

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45-50

You may still have dependent children and an outstanding mortgage, so your cover should be enough to provide for these. If your children are between 5 and 14 years of age, the average weekly household spend is around $2,085.

Consider how long it will take for your children to become financially independent or for your partner to make alternative income/living arrangements if you passed away.

50-60

If your children are a little older or finally ready to move out, you may want to give them a head-start in buying their first home or planning a wedding. You may consider how this could be done if you were no longer around.

For Australian families with children over the age of 15, the average household needs around $1,990 a week.

If you prefer to keep your family home instead of downsizing, you’ll need to consider whether your partner could afford to make the repayments if you were gone.

60-70

You may be thinking about retirement or even lucky enough to be there already. Data suggests that a comfortable retirement will cost at least $44,146 a year.

Without a steady income, you may choose to make sure that you or your partner can afford to live out the plans that you’ve made. An expensive health concern such as a terminal illness could get in the way of any late plans that you may have.

70+

Even if your current lifestyle is within your means, data suggests that many people in this age bracket may experience reduced health or increased physical restrictions, which can increase your cost of living.

Now could be the time to consider putting a safety net in place to protect your, or your partner’s, quality of life in case of the unexpected – a modestly living retiree needs around $28,165 a year.

Protect your family’s future with Seniors Term Life Insurance

Life insurance needs by circumstance 

It’s important to factor in your current lifestyle when setting a cover amount. Here are some of the things you should consider depending on your living situation or family makeup:

Single

Even if you haven’t followed the path of a spouse and kids, there’s still one person you need to look out for. On top of your everyday living expenses, you might want to prepare for how a terminal illness could force you into unexpected financial obligations. That means your cover amount should include the potential cost of palliative care, which can help you live comfortably and pain-free if you are ill. While Medicare will cover some of these costs, care centers can charge up to $120 a month (out-of-pocket) for basic services. This can be hard to afford if you’re already ill and don’t have an ongoing income.       

Although the cost of living will vary depending on location and state, you can work out an estimated cost by using the Australian average. The median weekly spend for Australian singles is between $400 and $600.

Couples

If you don’t have kids at home, you may be tempted to retire sooner or even treat yourself to a well-deserved lifestyle. However, this could leave your spouse with a lot of financial commitments if you suddenly passed away, especially if they have already begun to transition into retirement.

An unexpected death leads to your total household income being halved, so keep this in mind when planning for the future. Australian couples without children spend an average of $1,572 per week on basic living expenses. While your partner can reduce this amount if they were living alone, they may be locked into other long-term commitments such as a mortgage or other loan amounts.   

Family with children

Your cover amount should factor in both the ongoing living expenses of your dependant children, as well as any long-term plans you may want for them (such as a helping hand in moving out). Australian families with children over 5 have an average weekly spend of $1,990 – $2,085. This works out to be around $7,000 a month, but this amount would be slightly lower if you were no longer around. You’ll need to consider how long it will take for your family to make any necessary adjustments or get back to financial sufficiency after you pass away.

Education fees (including TAFE or university), the mortgage, and week-to-week living costs should be covered long enough for your children to become financially independent. Even if you’re not the main provider, your partner may need to become a full-time homemaker if you were to pass away, which can bring on added costs that need to be considered.    

Seniors or retirees

You may not have any large ongoing expenses, but if you’ve made extensive plans for yourself or your partner in retirement, these could potentially be jeopardized if you passed away. The Living Cost Indexes show that living expenses for aged pensioners have risen by over 23% since 2009. It’s now estimated that a modest retirement for one person can cost at least $28,165 a year. However, the Age Pension only provides around $644 a fortnight or $16,744 annually, which leaves a significant gap.

For self-funded retirees, the cost of living has risen by 22.8% since 2009. That means a comfortable and active retirement for your spouse could cost at least $44, 146 a year. Your cover amount should not only factor in these long-term expenses, but also any immediate costs that your partner would face without you – such as relocation/downsizing or planning your funeral.

Choosing the right life insurance product

Before taking out cover, you should consider the different types of life insurance available to you. Each of these are designed to meet different financial needs and usually have specific exclusions that you need to be aware of.

In Australia, there are different types of life insurance. Some include:

  • Term life insurance: covers you for a set number of years or until you reach a certain age (whichever comes first). This type of policy may expire after 10 to 20 years so it’s important to take out cover for when you are going to need it most. Find out more about Seniors Term Life Insurance.
  • All of life insurance: this type of policy covers you for as long as you live or make a full payment claim (or until you decide to cancel). An All of life insurance product may have a strict application process. You may need to answer a significant number of health and lifestyle questions or undergo a medical exam before being approved.
  • Group life insurance: this is a type of policy that you receive through your employer or superannuation fund. Keep in mind that group life insurance is not tailored to your specific needs or budget as your employer/super fund simply purchases a single contract which covers several people, being the funds members. This cover may expire when you reach a certain age or retire. The upside is that contributions you make to your group life insurance premiums may be funded by your superannuation fund, which could include pre-tax contributions. This can help you keep up with the long-term cost of your policy, however, it’s important to know that your beneficiaries may also be taxed on any payout they receive in some cases.  You should seek guidance from a tax advisor to ensure your circumstances are taken into account.

How Australian Seniors can help

Seniors Term Life Insurance helps put you back in control of your family’s financial future, with up to $100,000 in cover right when it’s needed most.

Benefits of choosing Seniors Term Life Insurance

A flexible cover amount that suits you – choose how much you or your family will receive if you pass away or become terminally ill. You can set a benefit amount from $10,000 up to $100,000.

Cover for when you need it most. We know that the older you get, the more you have to protect. That’s why our cover is designed for people aged 45 to 79, protecting you for up to 20 years or until age 85, whichever comes first.

Immediate cover. Once your policy is set up, you’ll be covered straight away for death by any cause, and for terminal illness (excluding suicide for the first 13 months).

20% advance payout to cover funeral costs. When your family makes a claim, we’ll give them 20% of the benefit amount in advance, so they won’t have to worry about the cost of your funeral or other immediate expenses.

Triple payout for Accidental Death. Your family’s benefit amount will be tripled if you pass away from an accident, helping with any last-minute expenses they might face.

Easy to apply with no medicals. Simply answer eight questions about your medical history over the phone. Once approved, you can get covered in minutes.

We’ll keep your premiums manageable. Unlike some life insurance policies, your annual premium increase won’t be based on your age which will help with budgeting later in life. Plus, we offer lower starting premiums for non-smokers.

Your own Australia-based personal claims specialist. If you or your family need to make a claim, we’ll assign one of our local claims specialists to look after everything. No need to explain things to multiple people.

See more benefits

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