Six Important Costs Your Family Faces If You pass away (And How Life Insurance Can Help Them Deal with Those Costs)
No one wants to think about it, but death is a part of life. Once you’re gone, your family will have to go on without you. The good news is that you can help them deal with the financial side even after your passing.
Death is one of the least popular topics of conversation. And it is also among the most unpleasant. It represents the end, after all, and no one likes to think about the end of their life.
But there are situations in which one should consider and account for every possibility.
If you have a family, you may want to think about what will happen to them after you pass away. While it is hard, it is also a very responsible thing to do.
Your family may run into financial difficulties if you die unprepared. It might take them months or years to recover. In fact, some families never fully recover after losing a provider.
Dying in Australia is costly, and the surviving family members might not be able to cover all the costs. The bills can quickly add up, and your death alone might cost tens of thousands of dollars.
And if you leave behind unpaid debts or the mortgage on the family house, the financial stress might become unbearable for your loved ones.
But you can start taking care of that while you are alive. If you play your cards well, you can help your family get through hard times with fewer financial problems.
Here is more about some of the most significant costs they may have to pay.
The Cost of the Funeral
Dying in Australia isn’t cheap by any measure. The associated costs can quickly go into the five-figure region. Your family will have to pay a lot of money to get everything done, and the funeral costs are just one part of that.
Funeral costs alone can be well over $10,000. The more affordable funerals these days can cost from around $4,000, and the most expensive can reach as much as $15,000 or even more. It’s all about the grandeur and the coffin and the like.
The overall cost is also going to include many things. Besides the coffin, there are the funeral director’s fees, transport, and so forth. The death certificate also comes at a price.
Any Debts That You Leave Behind
Australia’s overall household debt situation is far from stellar. That means that many aging citizens have at least some debt.
Back in 2016, the average household owed some $245,000. The total household debt across Australia was a cool $2.5 trillion. Unfortunately, it’s not looking any brighter in 2020, as you may know.
Dying with unpaid debts can put a heavy financial burden on your family. They will need to take care of these debts, or the creditors are likely to go after them. They will often have to cover your credit card debt, taxes owed, and other similar items.
Medical and Home Care Bills
Australia has an ageing population, and many of the baby boomer generation are getting older. Even if you belong to a subsequent generation, you ought to know about the medical costs of death in the country.
According to the 2014 statistics, 50% of deceased Australians passed away in a hospital. 33% passed away in residential care and only 14% in their home.
If you pass away in a hospital, that may cost your family a lot. The country-wide figure in 2014 was close to $19,000 and that’s only the average. For residential care, this ranges between $9,000 and $10,000.
Dying at home is the most affordable, but that’s only if you can help it. Your family might still have bills to pay if you were getting home care.
Paying for Essentials
You probably don’t need anyone to tell you about the daily living costs in Australia. They represent a significant portion of household budgets. If a working parent dies, the rest of the family might find it hard to afford the essentials.
Even if your family can afford the living expenses, it’s likely they are used to the life that your salary enabled.
But a great deal of this hardship may become unnecessary if you have a life insurance policy to help protect them financially.
Potential Administrative Fees Related to Wills and Estate Planning
First, your family will have to pay for your death certificate. They might need several copies, depending on the situation. If you don’t have a will, they will also have to pay for a succession certificate.
And if they decide to transfer the assets, they will have to pay administrative fees to set it in motion.
Potential Fees Related to Changing Bank Accounts and Mortgage
If any bank accounts remain open after your death which are in your name alone, your family will have to close them. That may also cost some money. Also, they will have to close and reopen all the joint accounts.
If you die before you pay off your mortgage, your spouse or family will have to satisfy the monthly payments. That might put significant stress on their finances.
Life Insurance Relieves the Burden
The costs explained in the previous section might seem overwhelming. But there are steps you can take to help minimize their impact on your family. One of these steps is to take out life insurance.
But what exactly is life insurance? How can it help?
Term life insurance is a type of insurance that pays out upon the death of the policyholder. When you buy a policy, you will have to nominate a beneficiary or the person who will get the money after your passing. Most people name their spouse or children as the beneficiary. You can have one or more beneficiaries.
After that, you will pay the insurer a monthly premium. And after your death, your beneficiary gets a lump sum payout from the insurer if a valid claim is submitted.
That money can help your family pay for the funeral and your debts. Also, it can help them cover any of your medical bills which may still be outstanding, close your bank accounts, and even pay off the mortgage.
If they are in a poor financial situation, your family can use the money to pay for the essentials, such as food, bills, and housing. You can also choose enough cover to allow for things like school and tertiary education expenses.
How can you help them?
You can get out life insurance and name your family members as beneficiaries. They will get a lump sum after you die, which will help them ease the financial burden.
To insure or not to insure?
That is a question that only you can answer. You may choose to get some professional advice, or to carefully consider your own needs and circumstances and deal directly with a Life Insurer like NobleOak who can provide you with general advice and product information.
This is general information only and does not take into consideration your individual circumstances, objectives, financial situation, or needs.