Life Insurance For Main Breadwinners With Young Kid(s)

willfong

willfong

Just curious how much life insurance cover you guys have and do you think you have enough cover. I know asking how much is enough is like asking how long is a piece of string as everyone has different situation and expectation.

Anyway, I'll start. I currently have only $225k cover on life and TPD insurance which was more than enough when there were just me and my wife with no dependants. But with our (first) baby arriving later this year I am thinking that will not be anywhere near enough and will need to increase that significantly (double to triple the current amount).

As a father (to be) and husband, I want to know that my child and wife will have at least enough to live modestly on without having to rely on government handouts and/or goodwill from other family members should something bad happen to me unexpectedly.

Another question is does anyone has a recommendation on a good life insurance provider/deal out there? I just have mine with my super at the moment because it's the easiest and the premium comes out from the money that I will not get to lay my hands on for another 30+ years anyway.
 
I have two young kids and up'd my Life Insurance to $500k. I also have Income protection insurance which pays %80 of my current salary for 4 months and then a lesser percentage thereafter.
 
i have zilch cover because $2500pa for my premium (non smoker, 28, exercising, 3 kids, big mortgage) is more than what it costs to insure EVERYTHING else i own combined.
 
Yeah I am thinking about half a mill is probably going to be sufficient for now.

BC, $2500 premium? How much cover was that quote for? That does sound expensive unless it's for $2m++ or you work in a high risk occupation or by exercising you mean extreme sports?
 
We have cover enough on both our lives so that if one of us dies, our loans are paid out. In the case of my husband he then has a choice of living off the rents, or staying at work. He would also get my super funds to invest.

For me, with no loans, I could continue to stay at home on the rents and would also have his super funds to invest to provide more cash flow.

A trap to watch out for is where a stay at home mother or even a dad with young kids may still be forced to go to work if there is not enough income to allow he/him to stay at home. This would be particularly hard with little children. We were advised when the kids were smaller to insure for a figure that allowed some funds to be invested to provide a cash flow to (at least) partly replace my husband's income, so that whoever is left could have the choice of either working or not, but not be forced to do so out of necessity.

I would talk to a broker.
 
willfong said:
Yeah I am thinking about half a mill is probably going to be sufficient for now.

BC, $2500 premium? How much cover was that quote for? That does sound expensive unless it's for $2m++ or you work in a high risk occupation or by exercising you mean extreme sports?
Click to expand...

btw.. I compete in MMA around the country and if I get hurt or killed during a competition then it is not covered :( oh well
 
Hello Willfong

In my previous life I was a financial planner and used a fomula to work out approximate coverage amounts

Here it is:

1) 10 years income - ?
2) Total outstanding debts - ?
3) Funeral expenses - $20,000 (give or take depending on your preferences - chipboard etc)

4) Cash in bank
5) Super amount/payout

Add 1,2,3 together and deduct total of 4 & 5

This will provide you with a life payout amount

TPD amount should be similar
Crisis cover should be around $100k

If you require a good FP message me

I hope this helps
 
willfong said:
Just curious how much life insurance cover you guys have and do you think you have enough cover. I know asking how much is enough is like asking how long is a piece of string as everyone has different situation and expectation.
Click to expand...


You would want to consider things like
-liabilities to be cleared...mortgage/IP loans/credit card
-capital to cover kids education needs...say $8000pa per child indexed at 3%pa until they're 17
-capital to replace income needs ..... 75% of gross wage indexed at 5%
-funeral/emergency expenses...say $10,000

willfong said:
money that I will not get to lay my hands on for another 30+ years anyway.
Click to expand...

That's not the attitude to have, its the decisions you make now that will have the largest effect on how much you will have in 30 years.;)
 
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Hubby and I both have $1 million of cover each. We have 3 dependant children.

We decided on $1 mill so that we could pay out loans, cover school fees for the next 12 years, have the surviving partner maintain financial independance. The most important factor for us was to provide each other with the option of raising our family and not working, or combining raising our family and working PT. Neither of us wanted to be forced into sacrificing family time because we hadn't planned well enough - especially when death alone is a huge upheaval.

As for insurance plans, we both arranged our life insurance cover through our industry super funds, so although I'm investing less in super for retirement, effectively the cost isn't coming off my bottom line today. In addition by insuring this way we are also saving tax by using super funds taxed at 15%, rather than after tax funds at our marginal income tax level.

Our cover is currently costing us $800 each per year.

Cheers
Buddybee
 
Thanks for the feedback guys, seem like I will need to increase it by more than what I initially thought.

shady said:
That's not the attitude to have, it the decisions you make now that will have the largest effect on how much you will have in 30 years.;)
Click to expand...

My attitude with super has always been that by the time I am old enough to access it, it will be just a small part of our portfolio and it's extra money, not money we need for the day to day comfortable retirement. :D
 
Buddybee said:
Hubby and I both have $1 million of cover each. We have 3 dependant children.

We decided on $1 mill so that we could pay out loans, cover school fees for the next 12 years, have the surviving partner maintain financial independance. The most important factor for us was to provide each other with the option of raising our family and not working, or combining raising our family and working PT. Neither of us wanted to be forced into sacrificing family time because we hadn't planned well enough - especially when death alone is a huge upheaval.

As for insurance plans, we both arranged our life insurance cover through our industry super funds, so although I'm investing less in super for retirement, effectively the cost isn't coming off my bottom line today. In addition by insuring this way we are also saving tax by using super funds taxed at 15%, rather than after tax funds at our marginal income tax level.

Our cover is currently costing us $800 each per year.

Cheers
Buddybee
Click to expand...

who did you use if you don't mind me asking?
 
I took out cover through my super about 2yrs ago. The $ figure was the amount of debt I had at the time ie. so if I died, the payout would kill all the debt over my portfolio and leave my fiancee with no debt and multiple rental incomes.

Since then however, I have not increased the cover to factor in my increased debt since then, but I figure the $ payout will still whack a sizeable portion of the debt off and leave the portfolio well and truely positively geared. I'll probably increase it in future years when kids come along.
 
Blue Card! said:
who did you use if you don't mind me asking?
Click to expand...

We both have Australian Super accounts www.australiansuper.com CommInsure is the Fund's Insurer.

We are in the process of determining the best way to proceed long term with a SMSF and retain our Life Insurance.

Does anyone know if it's a simple process (or even possible) to port an existing life insurance policy into a SMSF? The other option is we could always make very minimal contributions into this fund and "deal" with the admin fees until we figure it all out.

Cheers
Buddybee
 
We are similar. My wife and I are both 1M each paid thru a super fund by Asteron, we pay $1350/yr. We have 3 kids (primary) and figured the same as above, the house would be paid out and the partner shouldn't have to worry about bills or work til the kids are out of school/uni.
 
Am also in the midst of sifting through different figures etc to know how much etc is required.

The negative side of me still wonders if the insurance companies find a way out of paying up these type of insurance payouts when and if the time comes. Hope no-one here has had to find out.

Regards
Marty
 
willfong said:
Thanks for the feedback guys, seem like I will need to increase it by more than what I initially thought.



My attitude with super has always been that by the time I am old enough to access it, it will be just a small part of our portfolio and it's extra money, not money we need for the day to day comfortable retirement. :D
Click to expand...

As has been said many times, super is a tax vehicle, not an investment class. It is the most tax effective vehicle in which to accumulate assets.
 
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