People are always first to think about insuring their cars or houses when they purchase a new one but they often fail to think about protecting more important assets – themselves and also their ability to earn income or the ability to look after children and run a household.
Whilst protecting houses and cars is certainly important and certainly important to do it is also important to also think about insuring the driver of that car. If you had a money machine sitting in the corner of your house, would you insure it? A silly question to ask as you most certainly would. So why would you not insure yourself or your partner?
The levels of life insurance in New Zealand are extremely low compared to the Western World and income protection and the like are even lower. After houses and cars, health insurance is generally the most popular risk insurance to have, however there are risks to be thinking about.
What would happen if the main income earner died, or became ill or injured and could not work? Who would pay the bills and help out?
Life insurance is useful in clearing debt and also providing for income lost if an income earner died leaving someone behind with potentially young children, debt and less of an opportunity to earn income. However the loss of a partner who is not working but is looking after young children and running a household should not be ignored and the cost of this needs to be looked when looking at an over insurance package for a family.
Let’s face it if you won a $1 million in Lotto this weekend you would probably feel a bit ripped off as you won in the wrong week and a million dollars does not go far these days – just ask anyone who has bought a house in Auckland in the last 10 years. If a 30 year old income earner died today and they brought in $100,000 p.a. salary then ignoring inflation and wage increases there is $3.5 million which is lot to a family unit.
Other factors you need to be taking into account is the risk of someone not dying but being seriously ill or injured and either not being able to work or needing to be looked after.
There are insurance products out there which can protect against these risks such as: income protection which protects your income if you could not work due to sickness or injury, trauma
insurance, which pays a lump sum if you suffer a serious illness or injury and lastly total and permanent disablement insurance which pays a lump sum if you were unable to do your job or some of life’s daily activities.
Each of these insurance products should be looked upon for their merits and how they could be put into your insurance package.
People talk about WINZ and relying on the public system if sick, well WINZ pays about $200 per week plus child and rent or mortgage supplements but it is not as much as you would think and if you have a partner who earns income then you will most likely not receive it. Let’s face it we all complain about various public system failings so we can’t expect the system to help us greatly in this instance.
ACC does cover injury only accidents – not illnesses and pays 80% of your salary up to approximately $94,000 p.a. so if you earn over this you are not going to get any more. Also if you are self-employed you are most likely to not earn as much as you would like as if you salary split and run some fringe benefits through the business ACC does not recognise this at all.
Putting in place private cover which works in conjunction with ACC is a good idea especially for those who are self-employed as you can potentially wind down your ACC levies and crank up your private insurance cover to your advantage.
Having a good broker who can assist with this is important.
Lastly another factor to think about having trauma insurance is that some companies offer trauma cover on children. People ask for example why I would insure my children for trauma conditions. A good example is if you live in a part of New Zealand where there are no overnight oncology units for children. So if your child developed cancer you might need to travel and live in Christchurch or Auckland and this would mean extra travel costs, accommodation costs, loss of income for those that couldn’t work. Having some protection on the children in this situation could prove to be financially beneficial.