I'll pre-warn you - I love talking about insurance so this article may be a little longer than others and I love helping people with insurance so this is a shameless plug asking you to contact me if you need insurance cover!
What type of insurance cover and how much you need is not a one-size-fits-all scenario as everyone’s situation is so unique. This is where a Financial Adviser (me!) can help with free advice and a no-obligation recommendation.
However, as a general guide, we can break life down into four different stages and at these different stages, different types of insurance will likely be more important to you. Keep in mind that this is very general and if you would like personalised advice, please get in touch with me.
Under 30's
You may have a fairly low level of debt, few assets and possibly no dependents. Insurance probably isn't feeling very important to you at this stage at all. However, insurance is pretty inexpensive when you’re young, so now may be a good time to look at getting some into place, medical insurance for instance, especially before any medical conditions arise, to avoid pre-existing medical exclusions later on.
Young Family
You may now have a mortgage, a partner and/or children. Life insurance is far feeling far more important now, because you want to make sure that if you were to die unexpectedly, your loved ones could stay in the family home, hopefully with little or no mortgage. You would also want to make sure there was money available for living expenses for your family for the coming years so your partner if you have one, wouldn't have any financial burdens without your income, particularly when you have young children. Remember, if you pass away, your income and future earnings go with you.
Income protection is also important at this stage as living expenses are often quite high (partly due to servicing a high level of debt) and there may be times when there is only one income earner in the household due to having babies and children. If you were unable to work due to illness or injury, there would be a huge negative financial impact for you and your family. Income Protection is a really good part of your overall financial resilience plan, as we don’t always necessarily have a huge buffer in our savings accounts.
This is also a really good time to be thinking about Trauma Cover which is a lump sum payout should you be diagnosed with a critical illness like cancer, heart attack and stroke.
This is definitely a time when having a robust insurance plan in place is essential, and when you’re young, insurance can be less expensive than you expect.
Older Family
The kids may be leaving home, your mortgage debt is decreasing or even gone (yay!) and your assets, savings and investments e.g. Kiwisaver are increasing, so you may not need as much Life Cover as when you were in the Young Family stage.
You may also be ok with lower levels of income protection as you may be servicing less debt and therefore your living expenses may not be as high as they have been in the past. Also, if you’re a couple, you may both be working now, so if one of you wasn’t able to work due to sickness or accident, the financial impact may not be as devastating as it could have been during the Young Family stage with perhaps only one full-time income earner in the household. So this is a time when having a good look at your cover is really important to make sure that you aren’t over-insured for your situation.
There is an increased focus on your health, so major medical insurance is feeling more important and hopefully it is already in place before any health issues arise.
Retirement
Income protection isn't required any longer because you are no longer working, but medical cover is feeling really important to you. You may be looking at increasing your excess on your medical cover to help keep your rising premiums under control. You may also be interested in a little Life Cover to pay off any remaining debt, pay for funeral costs, or even as a type of inheritance for loved ones.
Insurance needs really do change throughout your life and your level of cover should be reviewed regularly to ensure it's still relevant to your current situation, to ensure you have sufficient cover, but you’re not paying for more than what you need. That’s where having a Financial Adviser is really important. A Financial Adviser can recommend insurance for all different stages of life and will work with you long term to ensure that you have insurance that is tailored to your needs, and changes as your life changes.
I specialise in personal risk insurance - Life Insurance, Trauma Cover, Income Protection and Medical Insurance - and I love helping families protect themselves financially.
It's easy to work with me. Simply email me at kim@thrivefinancial.co.nz or book time in my calendar for a free, no-obligation chat about your insurance needs and requirements: https://www.thrivefinancial.co.nz/book-online.
Kim
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