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.




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