Not everyone needs life insurance. But lots of people would benefit from having it. How do you tell when you should have it and when you don’t need it? Having life cover means paying for something you may never need, so why have it at all?
Newshub spoke to Pinnacle Life Marketing Manager Kerry Vaughan, who simplifies what can be a daunting topic.
"Generally it’s a good idea to have life insurance if you have financial obligations that mean your loved ones would suffer if you weren’t around to pay for things like rent, mortgage, groceries, or your kids’ education."
There are three key situations when you definitely should have life insurance.
1. You have dependants
Dependents are people who depend on your income; they are usually children but might also be relatives or friends. If you die, your Life Insurance will pay a lump sum that your dependents could use for anything they need. They could use it to put food on the table, pay the rent, future holidays or education.
2. You have a mortgage or other debt
If you have a mortgage or any other debt, then your life insurance pay-out can be used to pay off that debt leaving your family debt-free. Having no debt could mean the difference between being able to stay in the family home or having to move, or someone being able to take time off work to grieve.
3. You’re worried about what getting ill would mean for you financially.
"The chance of getting seriously ill is high. If you’re in your 40’s or 50’s, you’re likely to know someone in your age group who has had an illness or sadly died - or their partner has," Vaughan says.
Serious illness happens more frequently than you think - with many cancer diagnoses and high rates of stroke and heart disease in New Zealand.
In NZ, 63 people are diagnosed with cancer every day (cancernz.org.nz), 24 New Zealanders have a stroke every day - a quarter of these are under 65 (stroke.org.nz), and one in 21 adults live with heart disease - that’s 180,000 people (heartfoundation.org.nz)
If you’re diagnosed with a terminal illness and expect to live less than 6 -12 months you can have your life insurance lump-sum amount paid early. That can help your caregivers take time off work, alternative or expensive treatments or anything that makes life more comfortable for you and your loved ones.
"A lump-sum payment can be incredibly helpful especially if you’re grieving," Vaughan says. "Money does help if you need to stop working. It allows people to spend time with their families and gives them options to cope with a terrible situation."
Vaughan suggests you should make sure both partners have the same cover and are insured for the same amount.
So then, when don’t you need life insurance?
- You have no dependents or debts - if you’re a single person with no dependents, you probably don’t need life insurance – at least not yet.
- You’re very young - a child or student, in which case your parents hopefully have life insurance to provide for you.
- You have out-lived your need for it - generally, this means you’re retired. You may no longer need life insurance when you and your spouse have accumulated enough assets and income to care for yourselves independently. Hopefully, your children are self-sufficient adults by this stage and can sort their own life cover.
If you’re struggling to put food on the table, then life insurance is probably not a priority for your family. However, the cost is often not as expensive as people think and depends on your age and stage in life. It can be very affordable, for example, $27 a month for a 40-year-old non-smoking female for a $500,000 lump sum pay-out when you need it.
"It makes a huge difference to be able to give someone some money when their loved one dies," Vaughan says. "It really does make their life easier. In the first six months, it helps them be able to cope better. They don’t have to worry about day to day costs, petrol, mortgage or even a funeral."
New Zealand is very under-insured when it comes to life insurance.
There is a large proportion of people without insurance; a lot that doesn’t have enough and a number where only one person in a household has life insurance.
- Households with income of 70-100k 31 percent have no life insurance
- Households with primary school age children and 2 income earners - 71 percent of the main income earner had life insurance and only 58% of the second life had life insurance
- Households with couples – 47 percent are not insured by an average of $365,000
- Households with families – 26 percent not insured by an average of $362,000
Pinnacle Life is an independent New Zealand owned and operated life insurance provider. Their goal is to make life insurance more accessible and to provide every Kiwi family with the choice of protecting themselves in a way that is as easy and stress-free as possible. They provide life insurance designed by Kiwis, for Kiwis.
This article is created for Pinnacle Life.