In general, in the early years, most people will have large commitments but a low level of salable assets to support them if they get sick or injured or unexpectedly pass away.
Having sufficient insurance is all about protecting and providing so your family has a place to live, your children can complete their education and your partner can continue to live where they are most supported. And how much insurance is enough for you really depends upon how much living you have to do.
Playing sports, doing home renovations, driving a car and even crossing the road – it all involves a level of risk and that’s where we use our good sense and judgement to help manage those dangers.
That’s why we teach our children how to look before they cross the road and how to make better decisions.
The most important things in life, actually aren't things – they’re people
Life insurance pays you an agreed amount of money of you pass away or if you become terminally ill (The ATO now defines a terminal illness as one that’s will lead to death in two years (previously that was 1 year).
When you’re younger your biggest responsibility might be a new car where as middle age might bring with it increased responsibilities for partners, children, home mortgages, maybe an investment property and elderly or frail parents or in-laws.
Either way your greatest financial asset is your ability to earn an income. If you're sick or injured and cannot work and you lose your ability to earn an income, that could lead to a set of circumstances that have a Domino Effect that damages everyone other part of your life and those who rely upon you.
We love the idea of savings but we all have the same amount of time available but by the time we've saved enough for a rainy day, that day may have already come and overwhelmed us and our family. Alternatives like having to sell down assets, sell your house or car, to help pay debts, medical bills or related, seems to defeat the purpose of working in the first place. You may recover your health but not have a life to go back to – worst still you may recover your health only to face financial devastation.
Interesting note: The first life insurance company in America was formed in 1759 and called, ‘The Corporation for the Relief of Poor and Distressed Widows and Children of Presbyterian Ministers’.
Insurance is designed to protect you from the unexpected event and save you from needing to shoulder the responsibilities for the bigger things in life and transfer that weight to a life insurance company
The real issue is not that you can't afford it—its that you don't think it will happen to you.Drew Browne
Personal insurance is a simple and necessary decision to transfer the responsible of the bigger things in life, to an insurance company, rather than having to be responsible for them yourself or burden your family with crippling debts and a bleak future.