Great article. Research has consistently shown Australians don’t take out adequate levels of insurance to protect themselves and their family. In fact, research commissioned by IFSA in 2005 showed parents with dependents were critically underinsured by $1.37 trillion. Thinking of that another way – only 4% of the total population with dependent children have adequate levels of Life Insurance cover. Everyone needs good financial planning.

To answer your question, I’ll explain what I did for my family so that maybe you can apply it to you. After we had our second child, I decided that if something happened to me I would want my wife to have $100,000 of income per year. Figuring that she could get about 5% return on a moderately conservative portfolio, I have purchased a total of $2.25 million of 30 year term life insurance. (The extra $250k was for safe measure) This obviously doesn’t included our savings, retirements accounts, and business investments. I really felt that at the age of 32 that I had plenty of life insurance……welcome, third child.

Now I’m considering purchasing another $750,000k to get me to a cool $3 million. My point in sharing this with you is that, you may think you have plenty now, but your needs will change especially as you welcome young ones into your family.

I would definitely get the 30 year policy. You may pay an extra $17/mo for now, but you can always just stop paying on it at any time.

Let me know if you have any other questions!

So, I am still a little confused about how much insurance to get on my husband. I’m 22, and my husband is 25. We have no debt at all and have saved up for a downpayment on a house. Our househould income is $75,000, but we live on $40,000 and save the rest. So do we really need $1,200,000 in insurance ($40,000 x 30 years = $1,200,000)? I found a $1 million/30 year policy for $63/month. That’s more than I would like to spend, especially since my husband is so young and chances are he will live past the ripe old age of 55 (I hope a lot longer). Is a $250,000 policy enough? I could live off that for several years. By that time I should be able to find another husband! (kidding)

We have no kids, but will have a few in the next 10 years. Should we buy more insurance once the kids come, or do it now?

Also, should we get a 15 or 30 year term? I found a $250,000/15 year policy for $25 a month. The 30 year is $42. The Scrooge in me says get the cheaper one.

Thanks for your help!