How to Build the Right Insurance Plan for You and Your Family
When people think about insurance, it is easy to assume the goal is simply to have a policy in place.
But having insurance and having the right insurance for your circumstances are two very different things.
Your household might rely on one or two incomes. You may have a mortgage, children, business responsibilities or plans you are working towards. If illness, injury or another major life event changes your circumstances, different types of insurance can provide different forms of financial support.
That is why a good insurance plan should not start with a product. It should start with understanding what you need to protect.
Start With the Financial Responsibilities You Already Have
Before deciding how much insurance you need, it helps to look at the financial commitments your household depends on each month.
These could include:
- Your mortgage or rent
- Household bills
- Groceries and everyday living expenses
- Loan repayments
- Children’s expenses
- Your family’s reliance on your income
- Business debts or financial commitments
- Future plans such as education or paying down your mortgage
Once you understand these responsibilities, it becomes much easier to identify where a financial gap could appear if something changed.
For example, if your family relies heavily on your income, protecting your ability to earn may be just as important as protecting against the financial impact of death.
Our guide on why protecting your income is so important explains this in more detail.
Life Insurance Can Help Protect the People Who Depend on You
Life insurance is designed to provide a lump sum payment if the insured person passes away or meets the policy’s terminal illness criteria.
For families with significant financial commitments, this payment could help with things such as:
- Paying down or clearing a mortgage
- Repaying other debts
- Covering ongoing household expenses
- Supporting children and dependants
- Providing financial stability while the family adjusts
However, there is no single amount of life insurance that is right for everyone.
Someone with young children, a large mortgage and one primary household income may have very different requirements from someone whose mortgage is almost repaid and whose children are financially independent.
You can learn more about life insurance and how it works.
Think About What Would Happen if You Became Seriously Ill
Passing away is not the only event that can create financial pressure.
A serious illness or injury may mean taking significant time away from work, paying for additional treatment or rehabilitation, changing working arrangements or relying more heavily on a partner’s income.
This is where other forms of personal insurance may become important.
Depending on your circumstances, your insurance plan could include:
Trauma Insurance
Typically provides a lump sum payment when you meet the policy definition for a specified serious medical condition.
Income protection or disability insurance
Can provide ongoing financial support if an eligible illness or injury prevents you from working.
Total Permanent Disability Insurance
May provide a lump sum if you become permanently disabled and meet the relevant policy definition.
Medical Insurance
Can provide access to eligible private medical treatment and help cover certain treatment costs, depending on your policy.
Rather than looking at each type of cover in isolation, it is worth considering how they could work together.
The Cheapest Insurance Is Not Always the Right Insurance
Price will naturally be part of any insurance decision, but comparing policies based on premium alone can be misleading.
Insurance policies can differ in areas such as:
- Policy definitions
- Benefits and additional features
- Exclusions
- Waiting periods
- Payment periods
- Claims requirements
- Premium structures
Two policies with similar names may therefore provide quite different levels of protection.
It is worth understanding exactly what you are paying for before choosing or changing your cover.
You can also read our article on whether insurance companies pay claims for more insight into why understanding your policy and its terms matters.
Policy Ownership Matters Too
Another area people sometimes overlook is who actually owns their life insurance policy.
The policy owner generally has control over important decisions relating to the policy, including making changes or cancelling cover.
Depending on your personal, family or business circumstances, the way a policy is owned can therefore be an important part of your overall insurance structure.
We explore this further in our guide to life insurance policy ownership.
Your Insurance Should Change as Your Life Changes
One of the biggest mistakes you can make with insurance is arranging cover once and never looking at it again.
Your financial responsibilities are unlikely to stay the same forever.
You may:
- Buy or sell a home
- Increase or reduce your mortgage
- Have children
- Get married or separated
- Change jobs
- Receive a significant pay rise
- Start or sell a business
- Build up more savings
- Pay off debt
Any of these changes could mean your existing insurance no longer reflects what you actually need.
That does not necessarily mean increasing your insurance. As your debts decrease or your financial position changes, you may eventually need less cover in some areas.
Regular insurance reviews help make sure your policies continue to match your life rather than the life you had when you first arranged them.
Do Not Forget About Your Wider Financial Position
Insurance is only one part of protecting your family’s financial future.
Your savings, emergency fund, KiwiSaver, existing assets and other financial resources can all affect how much protection you may require.
KiwiSaver is another area where it is important to understand what you currently have in place rather than simply assuming the fund or provider you started with is still appropriate.
Your goals, timeframe and attitude towards investment risk can change over time, making regular reviews worthwhile.
Getting Advice Can Make Insurance Easier to Understand
Insurance policies contain definitions, exclusions, benefits and conditions that are not always easy to compare on your own.
A financial adviser can help you understand:
- What financial risks you may need to protect
- The types of insurance available
- How much cover may be appropriate
- How different policies compare
- How your existing insurance is structured
- Whether there are gaps or unnecessary overlaps in your current cover
At Halo Advisers, we take the time to understand your family, income, financial commitments and goals before discussing the insurance options available to you.
The aim is not simply to have more insurance.
It is to make sure the cover you have makes sense for your life, your responsibilities and your future plans.
If it has been a while since you reviewed your insurance, or you are unsure whether your current cover still suits your circumstances, Contact Halo Advisers to arrange a conversation.