Check both husband and wife have sufficient life insurance

I HAVE always thought life insurance is something of a misnomer - it should really be called 'death insurance' because death is what you are insuring against.

More to the point you are insuring against untimely death, and for families in particular it's important to have life cover in place for both parents.

Life insurance is designed for anyone with a family, dependent relatives or debt. If you die and your life is insured, your beneficiaries receive a lump sum payout.

In the case of families it is sensible for both parents to be insured even if one parent doesn't work. Too often the economic worth of a child rearer's contribution is overlooked. Both professional childminding and housekeeping are expensive services and it makes sense to insure the housewife's, or househusband's, life at similar levels to the breadwinner's.

With this in mind it's worrying to come across research by comparison site Finder that found women could be settling for life insurance policies with a payout worth around 15% less than their male counterparts.

The average policy for men for instance is worth about $513,130, while women sought cheaper policies with an average value of $445,849.

The study also showed that 70% of life insurance enquiries relate to policies for men compared to just 30% for women.

The main point is that both men and women need life cover, and in many cases, overlooking insurance for women can leave families exposed to financial hardship.

So how much should you insure your life for? Well, many insurance agents suggest a reasonable figure is 10 to 15 times the annual expenditure needs of your dependents. Others say anywhere between three and ten times your annual salary, in addition to whatever amount is needed to cover your debts.

Relying on the life insurance available through your super may be a low cost option. It's something many Australians choose to do though it's still important to check you have adequate cover - or indeed any cover at all.

A report produced earlier this year by MetLife and the Financial Services Council found 19% of Australian families do not have any life insurance in place. Fewer than one in two households are aware of having any life insurance products, and two thirds of current policy holders don't know how much they're covered for.

The report, entitled 'Apathy to Action', also found people tend to overestimate the cost of life insurance. In fact, life cover can be surprisingly affordable.

In its 2014 Life Insurance Star Ratings report, research group Canstar found that depending on your age it may be possible to take out direct life cover with a payout worth $500,000 for less than $50 a month. That could be a small price to pay to protect your family's financial wellbeing.

Protect those who matter in your life by asking your super fund how much cover you have. If it seems a bit on the lean side, ask about arranging a top-up or consider taking out life cover directly through one of our big insurers.

* PAUL CLITHEROE is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.

Topics:  life insurance

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