Protecting Your Family’s Future - Wills and Life Insurance

Since we've had bub I've often thought about the 'what if's' should anything happen to me or T. Its always been in the back of my mind, but I've never really done anything about it because its always sat in the too hard basket. Now that we're on the road to adding to our family again, we really need to get it all organised. I have to admit I didn't really know where to start {and I know a lot of you are probably in the same position} so I asked Life Insurance Comparison to guest post explaining how to protect your family with a will and life insurance.

Photo credit | Katharine Maree Photography

No one wants to think about the prospect of dying but if you have a family, you’ll need to consider what your dependants would do financially in your absence. Life insurance can be an invaluable investment in your family’s financial future but you should also look at having a will to make sure that your hard earned assets are allocated as you wish. Here’s what you need to know about safeguarding your family’s future if the worst happens.

Why You Need a Will

A will is a document that outlines what will happen to property and assets after a person’s death. It may also detail plans for funeral arrangements and who will look after dependent children. Having a will ensures that your assets will be allocated as you want whereas this is not guaranteed to be the case if you die without having had a will drawn up.

To access your assets without a will being in place, your next of kin would have to apply to the Supreme Court for Letters of Administration. In this scenario, your assets are likely to be distributed to certain family members but these may not be the ones that you would choose and the breakdown may not be as you had intended.

Wills are usually put together by a solicitor. Preparing your own will could mean that it’s not actually legally valid and could be treated as if you don’t have one at all.

Keeping Your Will Up to Date

Many people never update their will, which is fine if your original circumstances are not affected by changes in your life. Events such as marriages, divorces, new children coming into the family and acquiring new assets can all mean that the contents of the original will are no longer relevant. If this is the case for you, you should look at revising your will to make sure that your assets go to the people that you intend.

You can’t just “update” an existing will with new clauses, instead, you’ll need to have a new document put together and signed. This may incur a fee, which can vary from state to state.

Covering Funeral Costs

You’ll also need to think about how the costs of your funeral will be covered by your family, if the worst were to happen. Even a simple cremation can cost upwards of $4000, while a relatively fancy burial can be in the region of $14 000. 

Your superannuation fund may offer some help for your dependants with regards to funeral costs. This will also provide some degree of life insurance to dependants, although this may be much less than your family would need to survive after your death - particularly if you don’t have any other form of life insurance.

You can also buy funeral insurance through various providers specifically for the purpose of paying for your send off.

Buying Life Insurance

Would your family be able to manage from a financial point-of-view if the main earner were to die or become seriously ill? Many families would struggle to cope in this situation and some even end up in significant debt to make ends meet. Fortunately, there is a way that you can protect yourself against this possibility.

Life insurance helps if you die and leave your family without an income. This is known as death insurance but many people don’t realise that you don’t have to die for your family to benefit from life insurance. There are also income protection, critical illness and Total and Permanent Disability (TPD) products to provide an income if the policyholder cannot work due to illness or an accident, for example.

When it comes to determining how much life insurance your family will need, you’ll need to think about anything that you could fall back on such as savings, investments and your superannuation fund. Then think about how the amount of money that your family will realistically need to meet current and future outgoings without your income. The gap between the two figures is the minimum amount of life insurance that you should look to buy. As with insurance in general, you should review life insurance cover if your circumstances change to ensure that you still have enough protection.

There are several options for buying life insurance. You probably already have some degree of life insurance through your superannuation fund, and this can be a cheaper and more manageable way to “buy” life insurance if you can’t otherwise fit it into your budget. Premiums are deducted from your fund balance. The downside to life insurance through your super is the relatively low default cover, which can catch a lot of families out if the cover level isn’t increased from this. You may therefore find that this option doesn’t provide enough cover for your family’s needs. Many people therefore choose to supplement this with a life insurance policy to make sure that they have enough protection in place. If you choose to do this, it’s a good idea to compare life insurance policies to see how much cover you can get through different insurers and what their exclusions are.

Linking with Grace, Kaz & Sonia