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Life insurance: do you need it and how much is enough?

If there’s one certainty in life, it’s that there are no certainties. While it’s easy to keep putting off big decisions, it’s more prudent to discuss them with your partner or family – especially when it comes to their future financial security.

Published: 16 November 2020 08:00 CET
Life insurance: do you need it and how much is enough?
Photo: Getty Images

Life insurance is one such issue that it can be tempting to leave at the back of your mind. However, in order to best prepare your loved ones for any eventuality, it pays to understand how life insurance policies work. Here, with international insurance broker ASN, we present a brief guide to the main types of coverage available, and how to work out how much you should be covered for. 

Think you need life insurance? Find out how ASN can offer solutions tailored for you 

What kind of life insurance do you need?

Life insurance policies fall into two broad categories, each with their own benefits.

Term life policies: you pay a premium for a set ‘term’ or period of time, such as 10 or 20 years for example. During this time, should you pass away, a set amount of money is paid out to your family. Once the term is up, however, you’ll need to take out a new term life policy if you want to remain covered. With term life policies, you benefit from having more flexibility to easily alter your plans and the amount you pay.

Whole life policies: these policies work by taking part of the premiums you pay each month and investing them, without a set term. This makes the value of your policy grow over time. This value can be reinvested to pay for premiums. Alternatively, you can ‘surrender’ it at a certain point, with a large payout to live on, say on retirement. But this is not a decision to be taken lightly, as this means giving up the policy and the potential death benefit. Whole life policies have the benefit of accumulating far more value over time and ensuring that any payout will cover all costs. 

Planning for your personal circumstances

When looking at the types of life insurance, consider your own individual circumstances. If you’re younger and working overseas, perhaps a term life policy is more appropriate, as your circumstances may change. If you’re older and more established, with a growing family, a whole life policy may better suit your needs. 

Remember, also, that the cost of a policy tends to go up as you get older – especially if you develop new health conditions. It makes sense to discuss the topic with your partner sooner rather than later as part of your joint financial planning.

Through an international insurance broker like ASN, you can find life insurance policies tailored for you and your family’s needs. Benefits include the option of single or joint policies, cover for terminal illness and accidental death, and your choice of currency.

Photo: Getty Images

Learn more about the benefits of life insurance for you and your family with ASN

How much life insurance do I need? 

Once you’ve decided what kind of life insurance policy would suit you better, you’ll then want to work out exactly how much coverage you’ll need – one size definitely does not fit all. To do this, financial experts have come up with the DIME formula to calculate an appropriate level of cover based on four factors: debt, income, mortgage and education.

Debt: this is self-explanatory. Even if something should happen to you, your family will still be responsible for any debts that you may owe. So, grit your teeth and gather your credit card statements and other ongoing bills together and add this amount together. This is the amount that would have to be paid out to settle your debts. Life insurance can ensure that debts and legal fees are handled, supporting your family when they need it most.

Income: the money you make to support yourself and your family each year. You need to make an educated guess as to how long your family would need the equivalent of your salary without you – should you multiply your annual salary by five, ten, or even more?

If you’re married with no children, you might only need five years’ worth of salary to ensure your spouse is taken care of. If you have children, it would be good planning to ensure the amount covers the expenses of raising them up to the age of 18. 

Mortgage: if you’ve got a mortgage, or mortgages, gather the documents or statements together and find the payout amount – that is to say, the amount needed to pay them off completely. If you own properties in multiple countries that use different currencies, remember to do a quick calculation based on the exchange rate and come up with a single figure. 

Education: if you have children – or plan to have children – you may also want to consider the potential cost of higher education. In some countries, it’s free or heavily subsidised. But what if you live elsewhere, might move to a new country or just want to give your child the possibility of studying in the US, for example?

Then figure out the cost of the average degree in the country or countries where they’re likely to study and put that down. You might also want them to receive a private school education – if so, you need to add the fees to your estimated costs too. 

Once you have a total figure from these four factors, you have a good idea of your life insurance need. You may also want to subtract existing savings you could tap for expenses, however, to make sure you’re not over-insured.

Then you can go ahead with taking out your choice of fixed term or whole life policies, knowing that whatever the future holds, your loved ones will be supported, safe and set up for the future. 

Find out more about the comprehensive and flexible solutions ASN offers in partnership with some of the world’s best life insurance providers. Benefits include a single or joint policy and your choice of currency.

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LIVING IN AUSTRIA

‘Haushaltsversicherung’: How does Austria’s home insurance work?

'Haushaltsversicherung' is one of Austria's most popular types of insurance. It is not mandatory, but it is certainly worth evaluating, especially as it comes with many possible add-ons.

Published: 2 May 2024 15:22 CEST
'Haushaltsversicherung': How does Austria's home insurance work?

Austrians are certainly obsessed with insurance coverage, and one of the most popular and common ones is known as the “Haushaltsversicherung”—if you don’t have it already, you have certainly heard of it. Here’s what you need to know about household insurance.

Firstly, this insurance covers damages to “all movable objects within your own four walls,” as Austria’s Chamber of Labour (AK) explains. This includes furniture, carpets, and electrical appliances. It would also cover damages caused by fire, storms, water, burglary, and glass breakage. 

Certain types of insurance, such as private liability insurance or mandatory dog liability insurance, are almost always combined with household insurance—another reason why the Haushaltsversicherung is so popular in Austria.

READ ALSO: What kind of insurance do I need to have in Austria?

However, there are enormous differences in premiums and benefits, so experts suggest you check precisely what you need before taking out insurance. The AK also says you should talk to an insurance advisor to learn more about your specific case and needs, particularly if you have any valuables in your home. 

Additionally, they said: “It makes sense to check your policy every few years to ensure that you are properly insured. This guarantees that the sums insured and the risks included are up-to-date and sufficient”.

What should I keep an eye on when reviewing policies?

Of course, different companies have their own offers, and they are often highly customisable to fit your apartment and lifestyle—some things you need to be aware of, though.

Certain policies are tied to the size of your apartment, while others will have a lump sum regardless of the size of your place. Policies also usually differ depending on whether you live in an apartment or a house. 

While most insurance will cover glass breakage (such as when a hail storm breaks your window, for example), some might have it as an add-on (wahlweise mit Glasbruch). 

You may also add other types of insurance to your household insurance, the most common being mandatory dog liability insurance (Hunde-Haftpflicht), legal insurance (Straf-Rechtsschutz), and sports insurance.

READ ALSO: Should I take out insurance before skiing in Austria?

It’s worth it to read each policy, but you should know some common clauses beforehand. For example, insurance often won’t cover burglary costs if your house has not been properly secured and locked. This might seem obvious, but since door knobs don’t open from the outside without the key, people often leave their homes, especially for short errands, and don’t lock the doors all the way. Insurance and safety experts recommend you get in the habit of locking your home doors.

It’s also important to check if your insurance will pay you “Neuwert” or “Zeitwert” in case of damage. 

A Neuwert means the insurance will pay for a replacement object, regardless of how old the stolen or broken one was. However, many insurance policies still contain the so-called “Zeitwert”, something like “current value”, so you wouldn’t receive an amount that could pay for a new product. Instead, a loss of value of around 10 percent per year could be expected for most objects.

What should I do if there is damage to my home?

If you see any damage to your home from burglary, accident or other types, you need to notify your insurer immediately and report the damage you have suffered. 

The insurance conditions usually stipulate a maximum period of three days for reporting a claim in property insurance. The Chamber of Labour also recommends that you send a written notification of the claim (preferably by registered mail, they add).

“Make a list of all items that have been destroyed or lost and enclose it with your report to both the insurer and the security authorities”, they said. And, of course, in the event of fire burglary or robbery, always inform the fire department or police authorities.

READ ALSO: EXPLAINED: The Austrian insurance for if you get sued – or want to sue someone

How long does the insurance last, and how much does it cost?

The insurance term is usually specified in the counteract. In general, though, you can terminate it after the third year with one month’s notice if the contract has not already expired.

If you move house or move abroad, you can terminate your household insurance contract. You can cancel the insurance the day before the move begins (preferably by registered letter).

If you do not exercise your right of termination, the insurance will remain valid during the move and in the new home.

Regarding prices, they can be as low as a few euros a month (such as insurance specifically tailored to students living in shared flats) to several hundred a month if you have a large place with plenty of valuables or include several add-ons. 

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