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The life changes that affect your insurance needs

Marriage, the birth of a child, buying a new house or getting divorced are big life events. Your long-term insurance needs to keep pace with the changes these big events bring.

12 June 2018
4 minute read

father and daughter cuddling on the floor

Major life changes - having a child, buying a home, divorce and so on - mean changes to your insurance needs. When a big life event happens, take a look at your new financial situation to see how it has changed. You’ll then be in a position to know how much and what kind of long-term insurance you need - life cover or disability insurance for example - in order to take care of your family financially. Your existing insurance may be enough, or you might need a bit more.

You get marriedYour financial circumstances can change quite a lot when you marry. If you become a double income household, you might find your costs go down because you share expenses – one home versus two for example. If you are a married single income household, you may find costs increasing because one income has to go further.

Look at your income and expenses, including debt, as a married family, then look at your existing insurance and assess if you need more or less insurance. Two things to consider are:

  1. How would your lifestyle change if you or your spouse passed away or you lost one or both incomes due to disability?
  2. Are you supporting family members you weren’t supporting before you were married? You may need more cover for these extra costs if you are.

You have childrenParents provide care, food, shelter, healthcare, education, transport and entertainment for their children. If you or your spouse were to pass away, or become disabled, how would you cover these costs?

Dependent children usually increase our insurance needs

Dependent children usually increase our insurance needs. Increasing the sum assured on our life cover means that if we pass on, our children will be taken care of. Taking enough disability insurance means we can have an income and support our family if we cannot work.

Work out what you will need to make sure your children are cared for as you would want if you were no longer around or able to provide care.

Don’t forget that as a couple, you take care of cleaning, caring, transporting and cooking for the family, without being paid for those tasks. Should one of you pass on, you may need to pay a helper or service such as Uber to care for and transport your family. These costs can add up - which means your life and disability insurance sum assured will need to increase to cover them if you are no longer around.

Remember that costs increase with each child. And then, some costs go down over time as children become more independent, and you can consider reducing insurance when your children no longer depend on your income.

You buy a houseHome buyers are usually required to have life insurance to cover mortgage bond costs so that these costs will be paid if something happens to the mortgage payer. This also ensures that if something happens to you, your family won’t have to worry about paying off their home.

You are not required to take insurance from the bank that offers you a home loan, so check all your options and requirements before automatically signing up for a new policy to cover your bond.

  1. Find out how much cover you need.
  2. Check any existing life policies to see if you can increase the cover on those policies to cover your home loan, and if that increase will cost more or less than a new policy.
  3. If you sell the house, revisit the policy – it might no longer be necessary or valid, or it might be able to cover a new insurance need.

You get divorcedReview your insurance needs when you get divorced, paying special attention to childcare and maintenance payments, and any home loan insurance which you can cancel if you sell the home.

Divorce agreements may specify an ex-spouse needs to pay childcare costs for a certain time. To make sure this continues in the event of death a life insurance policy naming the children as beneficiaries can cover these payments. If you become disabled and cannot work, a disability policy that can cover your income will make sure you can pay maintenance.

Lifelong spousal maintenance is rare, but if it is part of a divorce agreement life and disability cover may be required to ensure maintenance is paid if the paying ex-spouse becomes disabled or passes away.

You are getting olderHealthcare costs increase as we get older and we also have a higher chance of getting a critical illness such as cancer or Alzheimer’s. One way to cover these healthcare costs is to take out critical illness insurance. Critical illness cover lasts for life, but most policies have a limit on entry age, so don’t wait too long to take this cover. At 1Life, you can take out critical illness cover if you are between the ages of 18 and 64.

If you have no dependents you may not need life cover, or as much cover as you needed when your children were young and depended on your income. However, some policies offer a terminal illness benefit, which can help cover medical and other costs in the final months of your life if you are suffering a terminal illness.

You may also want to leave a legacy for your beneficiaries that could be used to cover your grandchildren’s education costs, for example.

Remember these three things when your life changes and you review your insurance:

  1. A change in your life circumstances may mean you need to change your beneficiary.
  2. Cover is usually cheaper and there is less underwriting when you are young and healthy, so don’t wait too long to take out insurance, and avoid cancelling cover you may need later in life.
  3. Check in with your financial advisor for their objective opinion if you are unsure or have any questions.

To determine how much insurance you need and how much you should be saving each month, complete the 1Life Financial Needs Analysis online. It’s quick and easy - just three simple steps.

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