why parents need to protect their family
PARENTS with young children are ignoring life insurance despite this being the most important time in their life to have protection.
New research has found that 50 per cent of parents of children aged 12 or under say they don’t have life insurance, while another 9 per cent say they plan to get some.
Raising a family is the most expensive role most people have in life, and the loss of one parent to death or permanent disability can be financially devastating.
The cost of repaying debts, childcare, education and replacing lost income should be included when calculating how much cover is needed.
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The survey of more than 2000 parents by comparison website Finder.com.au discovered that just 9 per cent of people took out cover in the first five years of their children’s lives.
Some parents may have insurance they didn’t know they had, with separate Finder research showing that one in five Australians do not know if their superannuation includes life insurance.
“In the excitement of building a family, life insurance probably isn’t top of mind for many parents,” said the site’s spokeswoman Bessie Hassan.
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“Some cover is better than nothing so it’s worth at least taking out a policy through superannuation.”
However, automatic life insurance cover in super might only be $50,000-$100,000 and unlikely to be enough if disaster struck, said Planning for Prosperity financial adviser Daniel Budreika.
“Think about the purpose of the cover rather than ‘do I want life insurance?’. Think about the outcomes it will generate for the family,” he said.
“Do you want your kids to have to move house or move school? If a parent is gone, the impact is huge on a family.”
It’s not just the main breadwinner who needs life insurance.
Mr Budreika said the loss of a stay-at-home parent would mean either the remaining parent goes back to work or has to pay for extra care.
“You can’t replace a person, but you can at least try to replace them financially,” he said.
He suggests people calculate their insurance needs by asking key questions — such as how much debt should be repaid and how much education would cost — and then working backwards from there.
“We often find people with life insurance picked a nice round number, like $500,000 or $1 million, and haven’t really thought about it,” Mr Budreika said.
Professional advice can help you answer the key questions, and there are also free online calculators available. Remember to include debts, living expenses, superannuation and other assets when working out your required cover.
Source link: http://www.news.com.au/finance/money/parents-are-shunning-vital-financial-protection-for-their-young-families/news-story/e25957cee6e148655ce72c37a0dcc1d5