Life insurance – when good advice goes a really long way

Countdown’s started life insurance.

The move is part of a worldwide trend for supermarkets to muscle into the territory of banks and insurance companies.

It’s no bad thing to see a supermarket doing this. As the insurance industry reminds us, many New Zealand families are underinsured.

For families with no insurance, tragedies like the death or serious illness of a breadwinner can lead very quickly to a household financial crisis.

Heaven forbid your death means your loved ones can’t keep up the mortgage payments.

There are really only two routes to deciding how much cover to have.

The first is to go to a suitably qualified insurance adviser.

Their job is to help you to work out what risks you could insure against and give you options for insuring against their happening.

The adviser’s focus is on making sure there is money there for the family in the case of the death, illness or injury of breadwinners and

selling the people the breadwinner relies on, such as stay-athome spouses.

The kinds of policies advisers will offer will include life insurance, critical illness cover, income protection and medical insurance.

It will then be up to you to decide how much you can afford.

Buying insurance is a balancing act. You have to balance spending money on insurance premiums against spending on other things such as living and building up your savings and equity for a prosperous future.

But if you opt to buy direct instead of going to an insurance adviser, the question arises of how much insurance you should have.

Here, you become your own adviser.

Anyone with complex affairs, such as business owners and the selfemployed, should really consider going to a suitably qualified insurance adviser.

But those with uncomplicated lives can make decisions for themselves.

But you have to do your homework.

The internet is replete with insurance ‘‘calculators’’ to help you decide how much to have.

There can be differences between them and some are quite limited so the trick is to use three or four of them to make your calculations. That way you get multiple chances to think over your insurance needs.

The Countdown online life insurance calculator is a good place to start.

Filling it in requires you to think about what monthly income you’d want your family to have should you die.

It asks how much you would require for ‘‘immediate’’ needs such as funeral expenses.

And it asks what lump sum of ‘‘long-term’’ money you’d want paid to your family to help pay for future expenses such as the kids’ university expenses.

Immediate needs, monthly needs, long-term needs.

Three useful classes need to think about.

The Countdown calculator, however, focuses on the event of your death.

The drag on your family could be worse if you have a massive health event but do not die.

So you then need to go and find a calculator that factors that in income protection, such as the one Kiwibank has built.

But even that will fall short of the craft and experience that a good insurance adviser will bring and it does not consider medical insurance.

And an insurance adviser will do something many amateur DIY-insurance buyers will fail to do, which is to revisit their cover every year or so to check it still suits their needs.

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