Budgeting for life insurance on a single income

Are you the sole income earner in your household? Working out how to fit life insurance into your budget can be challenging but it may also offer you invaluable financial security.

Given the current economic climate in Australia, single income households may be feeling the pinch more than most.

When it comes to protecting you and your family’s financial future, however, a life insurance policy could make a big difference to your peace of mind.

Life insurance types

There are four main types of life insurance products – life insurance (death cover), total and permanent disability (TPD) insurance, income protection insurance, and critical illness (trauma) insurance. Each product covers you in a different scenario so you or your loved ones have financial security if you pass away, are unable to work either temporarily or permanently, or develop a critical illness. You can mix and match the products to suit your situation.

How to make life insurance fit into your budget

If you already have life insurance or are considering it and would like to make premiums more affordable, there are a few options to consider.

Some life insurance products can be funded through your superannuation, so you won’t need to pay out-of-pocket for premiums. It is important to consider your retirement needs when choosing this option, as paying for premiums from superannuation may impact your superannuation balance.

You could consider reducing your benefit amount.

Switching from monthly to annual payments may make you eligible for a discount.

Changes for the better in your situation, such as quitting smoking, may help lower your premiums.

You might consider removing any optional extras you’re unlikely to use.

Many life insurance policies have built-in inflation protection to ensure your benefits keep up with inflation.
This also increases your premium, but as this is optional, inflation protection and can be turned off.

For income protection, you could also consider:

Reducing your benefit period – the amount of time for which you’ll receive benefit payments.

Increasing your waiting period – the time you need to wait before receiving benefit payments.

How much insurance do I need?

This will depend largely on your personal circumstances – whether you’re single, married, have dependents, a mortgage or other debts, and many more variables.

I can help you work out exactly how much and what combination of life insurance products will suit your needs so that you can get peace of mind that fits your budget.

Any advice is general in nature only and has been prepared without considering your needs, objectives or financial situation. Before acting on it, you should consider its appropriateness for you, having regard to those factors. Before making any decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement.