Money
Life insurance
Introduction
You can save hundreds of dollars a year on your life-insurance premiums.
If people depend on you for income or care, you need life insurance. Choosing the right amount and buying from the right company can save you a lot of money.
We've looked at "term life" policies, and asked 20 companies to provide quotes for our two case studies. We also provide a handy calculator, so you can find out how much life insurance you need.
Do you need it?
Most people with a family or debt need some life insurance - just in case the unthinkable happens.
At a minimum, life insurance should cover your debts, funeral expenses, full repayment of your mortgage (including any early-repayment fee), and your family's immediate living costs. As well, you should add in the amount required to replace a lost income, or pay for a caregiver, until the surviving family is no longer dependent on this.
For this type of “pure” life insurance, we recommend term policies. Term life-insurance policies pay out the sum insured if you die while the policy is in force. You buy the cover for the period that you need it, which for most people is until their children are independent and their home is mortgage free.
We don’t recommend whole-of-life or investment-type insurance policies for pure life insurance. Both these are commission-based products that combine life insurance with a savings plan; and because they’re commission-based, they’re likely to be more expensive. You’re better off getting the best term life insurance you can afford and then looking for the best savings or investment deals.
Who are your dependants?
Life insurance isn't just for financial dependency. Consider the ways that you contribute to your family, and what you'd need to compensate for the loss of that contribution. This includes caregiving and childcare as well as financial support. It could also include the support you give to elderly relatives.
Use our Life insurance calculator to work out how much insurance you need.