Insuring your family’s future
When a new baby enters our lives, there are so
many issues to consider. While no one wants to be overly
pessimistic at this time, it's wise to ensure we're doing all we
can to protect our family's future. New dads Alden Komorowski and
Dean Picard explain how insurance can help you with one less thing
to lose sleep over.
Being new dads ourselves, we recently considered all the
issues a baby brings, while navigating a world with a lot more
unconditional love, but also a lot less sleep! As parents, we have
a heightened protective instinct, which can lead us to think about
protecting our family should the unexpected happen, to either Mum
or Dad. We all know someone who has faced hard times. They may have
been injured or very ill, causing major practical implications and
financial difficulties. The income we earn, the house we live in,
and the health of our children, for example, would all be affected
should an unexpected incident happen within our own family.
Insurance, in many forms, has been around
for a long time. Most of us know about life insurance and the
benefit it offers should one of us pass away. Insurance is also a
very cost-effective tool to minimise the risks of an accident or
illness. While we cannot predict when an incident or illness will
occur, we can plan and protect. We would like to give you some
basic answers to the question: How can I minimise the impact on our
family should we be affected by the worst-case scenario?
How much life insurance do I need, and how much is it going
to cost me?
This is hard to answer without having a qualified insurance adviser
do a review of your situation. However, this is a great question to
start with, as there are a number of areas we need to consider,
such as:
- Immediate cash needs
- Current amount of debt
- Mortgage on our family home and other
investments
- Funeral arrangements and costs
- Loss of either parent's income
- How long do you need to cover the loss of income?
This really depends on the age of your children and the
help and attention they will need during this time
- The costs of perhaps having a nanny for a period of time
to help with the children
- Children's education
- Retirement
Insurance is a cost-versus-benefit debate. You need to
consider your personal situation, and although it's not a nice
thing to think about, picture yourselves in this position: If
either you or your spouse was terminally sick, how much life cover
would you need, so the surviving partner and children don't have to
change their current lifestyle too much?
The grieving process may take many years,
but this will be easier to bear if you have multiple options
financially. The last thing we want our clients to experience is
having to sell the house because the surviving partner can't
maintain the mortgage payments, or the children having to change
schools and move away from their friends because you can't afford
to pay the school fees. Or, as a mum, you have to go back to work
to supply an income for the family. We realise this is not a pretty
picture, but you can stop it happening. We recommend you discuss
your personal situation with an adviser to ensure the life
protection you need to protect your family.
Do I really need life insurance if I'm a stay-at-home mum?
Shouldn't my husband have insurance since he's the breadwinner, not
me?
We believe that as a stay-at-home mum, you are equally as important
as Dad, and a tragedy striking you can often be a worse event for
the family. The role and responsibilities you have are the glue
that holds the family together, while Dad concentrates on creating
an income so the family has choices. Dad will often have an
impossible challenge filling both roles effectively, let alone
finding everything on a day-to-day basis!
The job or business that Dad currently
runs may be in jeopardy if he has to take time off and look after
the children. He may choose to get a nanny, which will have a
financial impact. Indeed some fathers may choose to give up their
career or business and focus on the children. It then becomes very
important to consider the impact of the loss of income. We believe
that life protection on Dad's life is important, but having life
protection on Mum's life too means a family's standard of living
can continue with a minimum impact.
Besides providing peace of mind that my family will be
provided for when I die, are there other benefits to having life
insurance?
Most life insurance policies have a terminal illness benefit.
This benefit is designed so the life insurance will be paid to you
prior to your death, should you be diagnosed with a terminal
illness (there are some criteria around this).
I know of a family where Mum had not been
feeling well and complained of having headaches for some time. They
went to their doctor and then to the specialist. The outcome was
that she had numerous brain tumours that could not be operated on.
The insurance company not only paid out her trauma insurance (major
illness protection) but also paid out the life protection under the
terminal illness benefit. They chose to spend the time together
before she died. They repaid the mortgage and then as a family went
to Disneyland and had many other adventures. This story has a sad
ending, but shows how insurance gave that family many happy
memories before Mum passed away.
We're having our first baby. What kind of life insurance
does my family need?
Firstly, we would suggest you book a meeting with a qualified
adviser where they can gather all the relevant facts and data about
your situation. They will then compile a plan and present this to
you, where you can discuss and decide what is best for you. This
process is the industry standard and best practise.
The main protection products are Life,
Income Protection, Trauma and Health/Medical. It does come down to
what you need, your priorities, and your budget. Discussions with
an adviser will allow the right protections to be put in place, and
in many cases you will agree to review and add protections if you
need them in the future. Implementing the perfect plan can be a
phased process.
What kinds of things will affect my insurance
cover? What if I currently have a condition like endometriosis or
breast cancer?
If you have adverse health issues, the premium costs may be a
little more expensive than they are for a 100% healthy person. The
insurance companies may also exclude a part of the body for
protection; for example, a person with long-standing back pain and
issues may not be able to protect that part of their
body.
But everybody is different, and there are
ways of reviewing certain conditions and getting protection on them
in the future, while having the rest of your person
protected.
Question: Does my baby really need life insurance? When
should I sign them up, and how much coverage should I
get?
Children under the age of 16 cannot be covered under life
insurance. However, there is a very good children's trauma and
illness policy available through some companies. The children's
trauma and illness policy is cost effective and designed to help
cover some of the expenses you would experience during a major
illness of your child. There is a lump sum payment of up to $50,000
for a select number of medical conditions. Children can normally
qualify for this from age one.
If I am insured, what is the process if I
die?
Establishing who owns the policy, right at the beginning, is an
important part of making the claim process as easy as possible. The
best way is to have you and your partner owning the policy
together, so if something happens to one of you, the surviving
partner is paid the money and can choose what they do with it,
without estate issues.
In the event of death, the surviving
partner would inform the insurance company of the pending claim.
You will need a certificate of death and the relevant forms to be
completed. It is an emotional time and very important to have your
adviser helping you every step of the way.
What would happen if I had trouble paying my premium, or I
lost my job?
Most insurance companies offer a grace period of up to three months
before a policy is cancelled because of non-payment. However, as
the recession has been tough on many people, some insurance
companies have offered to put a policy on hold for up to 12 months.
During this time you would not have any protection and with the
economy on the improve, this is now offered less often.
Do I get a discount if I get all of my insurances in one
place (car insurance, health insurance, life insurance,
etc)?
Not always, because different companies are specialists in
different insurance products. However, if you deal with an
insurance adviser they can discuss the policies that will suit you
best, for the best possible price.
In summary, insurance can be a tricky and complicated subject
therefore the best way to navigate what is right for you is to
discuss your situation with an insurance professional and work with
them to establish the right plan and protections for you.
Alden Komorowski and Dean Picard of The Insurance
Professionals, have helping families as the core of their business.
They are happy to answer your insurance questions or discuss your
finance issues.
www.theinsuranceprofessionals.co.nz
As seen in OHbaby!
magazine Issue 10: 2010
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