Why we want you to not need insurance
At Plus4, one of our goals might surprise you – it’s to help you significantly reduce your need for insurance over time. As our experts explain, your insurance requirements should ideally be progressively decreasing over time. Aging has a lot to do with that.
The advantages of aging
Your insurance needs should change depending on your stage in life. As you age, your outgoings and liabilities generally reduce. That means your need for insurance should also decrease.
Let’s imagine what life might be like when you’re 40 years old:
You have young kids at primary school
You spend much of your evenings driving them around to costly activities
You are seeing success after working hard to progress in your career
A rental property investment is also giving you another income source
With lots of responsibilities, high levels of debt, expenses and dependents, your insurance needs are high to ensure you’re protecting the ones you love. That means your key policies may include trauma, income protection, health and life insurance.
A loss of your potential future earnings at this stage in life could have a devastating impact.
Now, let’s fast-forward a couple of decades:
The kids have flown the nest and are financially independent (hurrah!)
You’ve retired and sold that rental property
You’ve paid off the mortgages and are living comfortably on a passive income
The family home has been exchanged for an apartment
In this scenario, your insurance risks have reduced significantly and your key policy is now health insurance. You’ve also had the foresight to plan ahead, working with an expert adviser, and are reaping the benefits!
Why your insurance risks tend to be higher when you’re younger
Loss of future potential earnings is one of the key reasons your insurance risks tend to be higher in your younger years. Losing an income earner through death/permanent disability in this stage of life will cause significant financial difficulties (and unnecessary stress) for the ones you love.
Think about this situation, when a 40-year-old earning $120,000 per annum becomes totally disabled:
At a minimum, this abrupt end to their working life will result in losing 25 years of their future earnings. That’s a total of $3,000,000.
They will also miss out on:
Pay increases, as their experience grows
Kiwisaver contributions
Cumulative benefits from long-term savings (and so on)
Sadly, this situation isn’t uncommon. While we may feel pretty invulnerable when we’re younger, a quick calculation shows the huge potential financial liability that could occur.
Helping you achieve those financial goals
Many of us struggle with planning for that seemingly distant future – it’s human nature, after all. The reality is that it’s never too early to begin and there are many compelling benefits from doing so (starting with compound interest).
Working with an expert not only gives you peace of mind, but also ensures you have independent advice to create a roadmap towards achieving your financial goals. Crucially, they should also ensure that your retirement planning goes hand-in-hand with your insurance planning.
Some things change. Others should stay the same.
Regardless of your age and life situation, it’s important to regularly review your insurance. We recommend doing this on an annual basis. While your insurance risks generally reduce over time, that review also helps remind you of any new assets you may have acquired (such as an investment property) which should be protected.
Health insurance is also one type of insurance worth maintaining throughout your life. Your premiums increase as you age because your needs increase.
Consider the scenario where you develop a serious condition requiring specialist treatment. Having immediate access to high quality care gives you the best health outcomes. Knowing you are getting the care you need, as soon as you need it, also makes a huge difference to your loved ones.
Finding an adviser you can trust
At Plus4 Insurance Solutions, our aim is simple – to choose the best of the best for you. For a completely personalised service that puts you first, our independent advisers are here to help. Get in touch today.