Life insurance, simply put, is designed to protect the financial wellbeing of your partner and/ or family in the event of your passing or illness that prevents you from working. It typically works by paying out a lump sum, or monthly payment once a claim has been approved. It helps keep your bills paid and stress reduced during difficult times.
Generally, life insurance is a personal choice in New Zealand. However, it is important to consider whether you might need it. A question Kiwis need to ask themselves is whether the sudden loss of their income would impact someone who relies on them financially.
Life insurance is designed to give you the peace of mind that your family and loved ones will be looked after in the event of something tragic happening to you.
How does Life Insurance Work?
When you choose a life insurance policy, you will select a lump sum payment amount to be covered in the event something happens. If you pass away, or are diagnosed with a terminal illness and have less than 12 months to live, your life insurance provider will pay out the amount insured to the “policy owner.”
The cost of your life insurance premium payments will be determined based on key factors such as your age, health and any pre-existing medical conditions.
Life insurance typically has a wide range of coverage for any cause of death from terminal illness to accidents. Some life insurance policies will even help cover funeral costs – which can be an expensive endeavour. Life insurance simply helps alleviate financial stress on your loved ones in an already upsetting time.
How much Life Insurance do I Need?
Who Needs Life Insurance?
If you have dependent children
If you have children who depend on you financially, such as your own kids, step-kids, or any children you don’t live with but support financially, life insurance is particularly important. It means that they will be looked after in the event of something unforeseen happening to you.
If you have a dependent partner or other dependent family
If you are married, or are financially caring for another person in your family such as a grandparent, would they be able to financially support themselves if you suddenly died? It’s important to consider life insurance when you have people who rely on your income to cover the mortgage, rent and other bills, even if they are adults.
If you have a mortgage
How much money would you still owe on your mortgage if you died tomorrow? Would your family be able to take over the payments or would they be forced to sell the home and move out? If the answer is no, life insurance is an important thing to consider. It will protect your family from having to make a drastic and sudden change to their living arrangements if you were to suddenly pass away or become too ill or injured to work. Life insurance, also, in some cases, allows your loved ones to take their time recovering and grieving your loss without the pressure of needing to get back to work to pay bills.
If you have debt
Life insurance will help cover the debts you may have on credit cards or personal loans in the event you can no longer pay them. It protects your family from having to shoulder this burden during an already difficult time.
Who Might Not Need Life Insurance?
Not everyone will need life insurance. However, as we move through different stages of life, it is important to re-evaluate our circumstances and consider whether we might need it. But who might not?
If you are young and don’t have dependents
Young people without dependents may not need life insurance yet.
If you are older and don’t have dependents
If your children have moved out of home and care for themselves, or you are divorced, widowed, and have paid off your mortgage, you may consider reducing or removing your life insurance cover.
Speak with an Expert
No matter which boat you are in, it is always a good idea to speak to an expert. You can chat to our team at Money Compare for free advice Monday to Friday 10am-6pm. Alternatively, you can contact our partners at The Insurance Department, who are leading life insurance advisors, to help you make a fully informed choice on your life insurance. You can request a free life insurance quote in seconds. Get sorted so you can have peace of mind, and return to the things that matter most.
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Don’t Forget to Compare Life Insurance
Money Compare makes it easy to compare the different life insurance policies and providers in the New Zealand market. By comparing life insurance policies side-by-side, you can make the most informed choice about your policy and find the best deal that will care for your loved ones.
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