A Break Down of the Insurance Coverage in my Twenties

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I was looking at my budget and realised that after the mortgage payments and utility bills, insurance premiums were my next largest expense. I thought it would be a useful exercise to consolidate the various policies and tally up the premiums to put things into perspective and to show what my breakdown of insurance coverage looks like in my twenties.

I had previously thought trauma insurance was a bit of a luxury, however the trauma insurance premium (which I’m actually in the process of applying for and will write about soon) is less expensive than the premium for one car. Weighing up the risk vs rewards for each policy, I’m comfortable with the amount I’m paying (except for the Lender’s Mortgage Insurance but unfortunately that’s unavoidable). Also, I look forward to working in the CBD again one day so we can sell the car and get rid of one of the car insurance policies, but until then, the car insurance is also necessary.

Life Insurance

  • $325,000 Insured Death Cover through AMP Superannuation ($0 premium)
  • $325,000 Total and Permanent Disablement Benefit through AMP Superannuation ($0 premium)
  • $5,312 Monthly Income Protection Cover for up to 2 years – employer funded through AMP Superannuation ($0 premium)
  • $250,000 Benefit on the AMP Elevate Trauma Insurance Plus Plan + Reinsurance Coverage ($80 monthly, level premium)
  • Total life insurance premiums: $80 per month

Other Insurance

  • Basic Hospital and Flexi Extras (Dental, Optical, Physio etc) Private Health Cover through Medibank ($88 monthly premium).
  • Comprehensive Insurance for two cars through CGU ($235 monthly premium, however this is shared with my partner)
  • Lender’s Mortgage Insurance (this was a one-off compulsory requirement of $12,000 because we didn’t have a 20% deposit for our apartment purchase. I aim to pay off the mortgage in under ten years so I’ll divide the $12,000.00 over 10 years, bringing it to $100 per month)
  • Total other insurance premiums: $305.50 per month

Total Premiums: 385.50 per month

Personally, I’m not interested in home and contents insurance (we live in a secure apartment), funeral insurance, mobile phone insurance etc. There are certain events that I would be willing to pay for directly out of my savings.

When I’m in my thirties, I envisage that the following changes will be made to my insurance coverage:

  • Increasing my income protection insurance to cover income payments up to age 65 (rather than just for 2 years). I have recently found out income protection premiums are 100% tax deductible so this will be the next step;
  • A year before I plan to have kids, I’ll take out the top level private health cover which includes obstetrics; and
  • When I have kids, I will take out a higher level of life insurance.

I suspect that I may be under insured however it’s very subjective, others may think that I’m paying far too much insurance for my age. I’d be very interested to hear your thoughts and experiences.

That Career Girl

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15 comments

  1. Honestly I wish things were this affordable in South Africa. Just as an example, my car and household insurance is R1200 a month and that’s without including my medical insurance, life cover or anything else.

    1. I just did a conversion and that is around $120 Australian, which seems comparable to Australian prices, but I guess it is hard to tell without factoring many other things.

  2. I’m really glad you posted this! I’m in my twenties and have just started thinking about insuring myself. It’s good to see a breakdown of what someone else has!

    1. Thanks for sharing, I enjoyed the read. I’m definitely aiming for FI however I do think that at this stage, a major illness or accident would set me back on the FI journey if I didn’t have insurance. Our mortgage is only 360k between the two of us (I read somewhere that the average persons mortgage is in the 300s on an individual basis) so I’m comfortable that my current insurance is adequate. It is quite an expense I know. Out of curiosity have you scaled back on insurance from your twenties?

    2. Yeah, we scaled back our insurance in more recent years, but it was less to do with age and net worth and more to do with thinking about it differently. I can certainly appreciate why you have the insurance you have, but wonder if the arguably low risk of those illnesses occurring at your young age has been taken into account.

      At age 25 we seemed to think that having $1m of life insurance each made sense, but now we only have $600k each. We live a lower cost lifestyle now (despite having kids), so that has probably contributed to our change of philosophy in relation to insurance.

      We have also changed approach on private health insurance recently, as detailed below. It may be of interest to you as well given how much you spend on health insurance at such a young age.

      http://insideraccountant.com/2015/05/29/how-to-get-cheap-health-insurance-in-australia/

  3. One of the real cons to becoming an adult! We just signed up for income protection and holy moly is it incredibly expensive! (I guess I am high risk…and thus not cheap to cover.) The other thing chipping away at our budget is indemnity insurance.

    1. The life insurance that I get free as part of my superannuation is term insurance. I would hope to be insured later in life but if I have children I would increase the amount insured. Interestingly whole life insurance isn’t offered in Australia, this is the first time I’ve heard of it.

  4. I find your comment “I’m not interested in home or contents insurance because I live in a secure apartment” interesting – what happens if your pipes leak and damage a neighbouring apartment, or even your own, and you have to replace pipes, floor coverings, walls etc in your apartment and perhaps a neighbours – how will you pay for that? I’m pretty sure home insurance is also a requirement of the lender when you take on a mortgage? I know contents insurance is at each person’s own risk, but damage to property can be costly.

    1. I should rephrase, I’m not interested in contents insurance because I live in a secure apartment on the seventh floor, with lots of video surveillance. I am comfortable to accept the risk that if we were ever burgled or some other event occurred that I would need to replace things. I pay a contribution to building insurance through the strata fees. I have had a mortgage for a year and it was never a requirement that we have separate home insurance. Probably because the lender is satisfied with the strata insurance.

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