#1 Your situation

Insurance 101-Families

Expenses like a new home and young children weigh heavily, and you’re likely to be still early in your career(s), far from your peak earning potential. As well, you will likely to be putting aside funds into KiwiSaver, saving for your children’s education and of course an emergency fund.

The First Steps

The key is to imagine you’re at the beginning of a long-term building process. Financial security is a combination of insurance protection, as well as savings and investments that accumulate over time. Start small and try to cover all your bases. As your career progresses and your income increases your financial security will grow as well.

The first step in establishing your financial security is to confront the biggest threats to it by asking yourself some tough questions: What would happen if you or your spouse or partner became sick, injured or died? All of those situations can be devastating to your family’s financial ‘health’. That’s where insurance comes in. 

Life Insurance

Life insurance can provide your family members the financial resources to maintain their lifestyle when you die. It can replace some or all of your income, pay off debts, cover funeral costs and can even help fund longer-range needs like university or retirement. Insure your spouse or partner as well, even if he or she doesn’t work outside the home. A stay-at-home parent provides vital household services – childcare, house upkeep and transportation to name a few – that would be expensive to replace. 

Trauma and Disability

Trauma and or/Disability Income insurance is also a must to consider. Everyone knows someone who has suffered with cancer, heart disease or a stroke. You may also know someone who has been severely injured and watched them deal with their challenges. Trauma Cover provides cover for many common, yet serious conditions (not necessarily terminal) by providing a lump sum payout to pay for those unfunded medical costs, assist recovery, offset lost income, pay off sundry debt, etc.

Disability Income insurance will replace a portion of your income if you are unable to work due to a disabling illness or injury. Why is that important? Think about how long you could make ends meet if your income suddenly disappeared. The majority of families wouldn’t make it more than a month before serious financial sacrifices would have to be made.

Medical Insurance

If it’s affordable, many families also consider Health Insurance an important investment in peace of mind – giving you the confidence to handle the medical life’s ups and downs or unhappy surprises together. Having health cover is knowing your family can be covered to take on any health issue that may come your way. There are many reasons why families take out private health insurance. Typically, they are seeking peace of mind – the security of knowing they can get immediate access to the right level of care and treatment that they require, while being financially protected.

The focus should be on quality hospital cover, rather than the ‘extras’ like obstetrics, fertility treatment, prosthetics, hearing aids, GP and prescription costs, etc. 

Insurance from your employer

Many larger employers and some smaller ones also offer various types of insurance under a Group Plan. If you think you need more, it may e worth buying additional coverage through your employer, if available. Unlike group coverage, privately owned insurance stays with you even when you change jobs, but most group insurance plans allow you to “convert” your cover within 30 or 60 days if you leave your employer.

Emergency Fund

Regardless of whether you decide it’s best to have insurance or not, you’ll want to create an emergency fund equal to 3-6 months worth of basic living expenses. For help with building an emergency fund, visit the Sorted website.