The right life insurance is a balancing game between affordability and cover, but the worst thing you could be doing, well, other than having no insurance, is having the wrong type of insurance.
Kiwis, as a nation, are criminally under insured. Life insurance is designed to help protect those people in your life whom you love if the worst was to happen to you. Unfortunately, results of a recent study into how New Zealanders insure themselves has revealed a shocking proportion of Kiwis – more than 7 out of 10 of us - have inadequate levels of life insurance.
But what does that mean in real terms? Well, it wouldn’t be being dramatic if we said that essentially Kiwis are gambling with their lives!! OK… a bit dramatic, but still, it is a VERY SERIOUS situation that you should review.
Am I underinsured?
Unfortunately, there is no one single “correct” answer. The appropriate amount of life insurance differs for everyone depending on their assets, income, and financial goals. Some families will have enough personal savings to cover their expenses without an income, for a short, medium or long term period. Dual income households may only need insure the main breadwinner as the secondary income could be covered should the worst happen and in that case the life insurance payout could be to provide funds for a specific purpose, like paying for university education of clearing the mortgage.
As we have said in the intro, being underinsured is actually very common and the cause is usually due to a change in life circumstances. Life insurance, and the types of cover you have, should change with time and circumstance. It is not a case of sign up for insurance once and stick with that forever. You should consider having an insurance health check no matter what your circumstances, but particularly if you meet any of the following criteria;
• New members in the family? Have you had more children?
• Your income has risen since you started your policy
• Non-earning partner or spouse is uninsured
• You have a significant amount of debt
• You or your family’s financial goals have changed
• You have moved house and have a new mortgage
Some people will be well aware that they are not insured to the level they would like, but it may be that they either can’t (or think they can’t) afford the premiums for full cover or they choose to spend their disposable income somewhere else.
Can I afford life insurance?
Many people, often wrongly, make a decision on life insurance based on faulty assumptions about cost. In one study, when asked to estimate the cost of a $500,000 death benefit life policy for a healthy 30-year-old male, over half of the respondents said more than $500 per year. The average cost of such a policy is closer to $300. Basically a large cup of coffee a week…
Insurers will base the cost of your life insurance premium on your health and age. Some additional factors will include your weight, whether you smoke (vape or other nicotine products), your occupation, your exercise/activity levels and even your family health history.
By understanding what impacts on the cost of your life insurance premiums before you proceed with an acceptable quote, you can better understand the options when choosing what’s best for you and your family. The team at Money Compare work with leading insurance brokers who are absolute experts in their field so if you are unsure what you need or want from a policy complete our 2 minute questionnaire and one of our advisor team will get in touch.
Of course, the “right” amount of coverage is entirely relative to an individual’s situation. People purchase life insurance for different reasons. Often, it is used to replace the policy owner’s lost income if he or she should die unexpectedly or become terminally ill. The spouse and children are then able to pay the bills. There is a whole world of different types of insurance out there from Life Insurance to Trauma & Critical Illness Cover. Health & Medical Cover, Income Protection or Mortgage Protection. It is easy to get lost in the detail, confused and end up suffering from choice paralysis… making no decision at all! Here at Money Compare we can help. Just get in touch and we’ll walk you through every stage, no hard selling, just explaining the various features and benefits of the different types of policies available and giving you the information to make a fully informed choice on your insurance needs.