Insurance through life: Young family
This is general advice, intended to help you understand what is available, what questions to ask and key factors to take into account – you need to seek advice from an insurance adviser before buying insurance.
As life changes, so does what you need from your insurance. This includes the types of insurance you need, how much, and the costs of the premiums. Understanding this means you know which questions to ask your adviser and can make informed insurance decisions.
Young family
One minute life is free and breezy, the next you are responsible for the care and wellbeing of the next generation. While this life stage is marked by the arrival of children on the scene, people become parents at many different ages, stages, and career levels, so there is a lot to consider when setting up insurance. This is why working with an adviser who understands your situation is so critical.
You may also have a partner, a high mortgage and other debts to manage. You are at the riskiest stage of life if something goes wrong, so the need for insurance is at its highest, however, from an underwriting perspective, your risk is often still quite low.
These factors, and an understanding of your financial goals, all play a key part in decision making. Having frank discussions about the roles of different members of the family, and how the family unit and day to day life will be impacted if a parent dies or becomes unwell, is incredibly important.
Having the right insurance at this life stage can quite literally change the course of your life.
Lump-sum insurance policies
These insurance policies pay out a lump sum in the event of an accident or certain illnesses. They are not offset by ACC (meaning you can claim both at the same time).
These types of insurance are often used to extinguish debt, but can be important even if you don’t currently have a mortgage. For example, if your main income earner can no longer work, do you plan on renting for the rest of your life, or do you want to have control of where you live? In New Zealand finding long term rentals can be challenging, and home ownership provides a sense of security and connection to a community. It can be helpful to think about how much would you need to buy a house, either freehold or manageable on one income.
Life insurance
As this policy pays out in the event of your death, you need to think about what you want it to cover, and what you want life to look like for those you leave behind. Do you want to pay off debt? Cover living expenses for a period of time? How do insurance premiums fit into your budget?
Life insurance premiums tend to rise with age, and will change depending on your sum insured.
Trauma insurance
Trauma protection pays out a lump sum if you experience specified injuries or are diagnosed with certain illnesses. Different providers have slightly different lists of illnesses or injuries, but all include cancer, heart attack and stroke. Injuries can include head trauma, burns or time spent in intensive care.
Trauma insurance can play a key role if a parent is taking on the day-to-day care of children instead of working outside the home. This is because you can get trauma cover even if you don’t have an income. It could then be used to cover rent, travel, or the income or expenses of someone who is looking after you.
Trauma policy details vary between providers, but many also cover dependant children at no extra cost. Insurance options for children are limited and this cover can make a huge difference to your family if you need to claim on it.
Trauma insurance premiums tend to rise with age, and will change depending on your sum insured.
Total and Permanent Disability insurance (TPD)
TPD is paid out in a lump sum if you were to become totally and permanently disabled through injury or illness. It also includes funds to modify a home.
When deciding how much cover to have, you should consider existing debts, the loss of all future earnings and investment potential, and what other insurance you may have in place. It is always best to have this discussion with an adviser, as they can explain how the different types of insurance complement each other so you don’t double up or leave any holes.
Learn more about TPD insurance here.
TPD insurance premiums tend to be lower when you are younger. Because the risk of being totally and permanently disabled is low, this type of insurance has some of the lowest premium rates.
Income and mortgage protection
The younger you are, the more significant your future potential earnings will be. Your ability to earn an income is your greatest asset, and needs to be insured as such. There are several different ways to structure income protection insurance, so talking to an adviser about your circumstances is key.
Income protection is linked to your income, and paid monthly, after a standdown period, following an accident or diagnosis of an illness. It is offset by ACC, but mortgage protection isn’t offset – meaning it won’t reduce what you get from ACC. While ACC covers injuries, it doesn’t cover illnesses, which income protection does.
Income protection premiums tend to be lower when you are younger, but also depend on the level of cover.
Health insurance
Having health insurance means getting the treatment you want, when you want it, which means getting back to everyday life faster. We explain why you should think about having health insurance here.
Having health insurance for children is something you may also want to consider. While GP visits for children are free, health insurance means not having to go on waiting lists for treatment and having an insurance policy in place while young means your children will be covered without many, if any, pre-existing conditions.
If you are ready to get the best cover for your life stage, or want to discuss whether your current insurance is still fit for purpose, get in touch with one of our friendly and helpful advisers.