Life in­surance – when good ad­vice goes a re­ally long way

Central Leader - - OPINION -

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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