When you’re young and single, or you’re in your first serious relationship, life can be a lot of fun. You’re becoming financially independent, you have social commitments every weekend and a long list of travel spots to visit. The topic of life insurance probably isn’t something you've given much thought to before (if at all), but it's actually the perfect time to be investigating your options for protecting yourself and your lifestyle.
The first step is understanding how life insurance works.
I’m young and healthy. Do I need life insurance?
If you haven’t done much research into what life insurance is, you might assume it’s just a lump sum figure that’s paid out should you pass away some time down the track. While that’s one form of cover, there are other scenarios like illness or injury where you might need help. For example, income protection can be a great safety net to protect yourself and your lifestyle in the event you’re injured and unable to work.
You’re never too young to start thinking about the cover you need. There are also many advantages to sorting out your insurance while you’re still young:
- Cost: life insurance premiums can be substantially lower, as young people are generally fitter, healthier and considered to be less of a risk to insure.
- Availability: just as premiums are cheaper, there are also more options available when you’re free of health issues and still relatively young. It can sometimes be harder to take out insurance later in life if any health complications develop.
- Flexibility: once your insurance plan is in place, you can review and tweak your cover as you need it when circumstances change.
In addition, tax savings are possible as some income protection premiums are tax-deductible. Depending on your circumstances, this might be a handy deduction at tax time.
When do I need life insurance?
The answer to this question will be different for everyone. But let’s look at a few common scenarios where life insurance might be a good idea to look into.
You’re young and in a couple
When you’re in your 20s or 30s and you’ve settled down with a partner, your financial commitments are probably growing. Are you buying your first home, thinking of getting married, furthering your career or changing jobs? If so, it could be a good time to look at your life insurance needs.
If one of you falls sick or is injured and unable to work for an extended time, financial pressure could impact you and the relationship. Balancing the books on two salaries isn’t always easy, but on one income it’s even harder. Options like income protection and TPD (total and permanent disability) cover can provide the security of knowing that there’s another source of income to call on if the unexpected happens.
Life cover is another way to put a financial safety net around you and your partner. If by chance you were to become terminally ill or pass away, it could help your other half manage mortgage repayments or other debts after you’re gone.
You’re young and single
Just earning an income can be worth protecting, no matter what stage of life you’re at.
Whether you’re new to the workforce or you’ve got a few jobs already on your CV, chances are you’ve got some regular financial commitments that need to be met. If you’re relying on your own income to stay afloat, what would happen if that suddenly stopped? Hopefully your 20s and 30s will be a largely hassle-free time, but if you were injured or fell seriously ill, your ability to continue to live the life you’d like to could be greatly impacted if your finances became a concern. Consider options like income protection and TPD (total and permanent disability) cover, to see what might be suitable for you.
You’re young, with a growing family
If you’ve already started a family, then you’ll want to protect your family any way that you can.
If something did happen to change your circumstances unexpectedly, would your family be protected? There are plans you can put in place now to make sure they are. Life cover, income protection and disability (TPD) cover are all worth considering to ensure you have coverage for what life may throw at you. It’s like a back-up plan, so that at the toughest of times, money is one less thing for your family to worry about.
You’re settled and want to protect what you've built
If you’ve worked hard to build a comfortable life for yourself, protecting that lifestyle will be just as important as you continue to move through life.
Whether you have children or not, you’ll no doubt have financial commitments, including debt if you have a mortgage. Insuring yourself for life cover, income protection and TPD can give you the peace of mind that no matter what happens, your finances can stay on track and you won’t be leaving a burden of debt to someone you love.
It’s not always easy to know what type of insurance will suit your personal circumstances, and they won’t always stay the same. The most important thing is to recognise that while life can have its up and downs, there are things you can do now to give yourself a little extra peace of mind, and make sure that the people you care about most are supported when times are tough.