Do You Really Need Life Insurance?

As a parent, there’s nothing more I want than to provide a good life for my children. And as morbid as it sounds, if I died tomorrow, I would want to ensure they still had that same opportunity.

So to answer the question, if you have a partner, children or other people that depend on your income to survive then YES, you do need life insurance!

Ask yourself “if I die tomorrow, how would my family survive?” Could they manage:

  • The mortgage or rent payments

  • Repayments of any debt

  • Basic costs of living – food, clothing, utilities, rates, insurance

  • Education or daycare costs

  • If you have a business, is there debt owing

Where would the money come from to pay for the above? 

How much of a disruption to your family’s life would result if they had to deal with the burden of these costs?  

Would you really want to put that pressure and strain on your loved ones? 

So how much do you need?

This is a very subjective question as everyone’s financial situation and personal preferences are different but it will depend largely on how much and how soon you’d have access to money if your partner dies.  Some things to consider when working out how much you need:

  • Repaying some or all of the mortgage or the weekly rent until the kids finish school

  • Repaying short term debt eg credit cards, personal loans

  • Cover some or all of your family's basic monthly household expenses, at least until the kids are of an age that you can return to work and earn enough to cover these yourself

  • Funeral costs, the average funeral in NZ costs around $10k

Don’t forget Kiwisaver is paid out in the event of death. 

How much does it cost?

Life cover is relatively cheap compared to other types of insurance. 

$500k life cover for a 40 year old non-smoking male is around $35/month and for a 35 year old female around $20/month.

The cost of your life cover will increase every year as you age but if it’s simply to cover debt and living expenses, as these reduce over time and the kids leave home, your need for life cover will reduce and you can cut back on how much you have. 

A less common option is level cover where the premiums are evenly spread over the life of the policy so you pay more upfront and avoid large increases year on year. 

How often should you review your life cover?

Whenever a major life event takes place, your life cover should be reviewed.  This includes when you add new little ones to your family, increase your mortgage or debt levels or have a significant change in income or lifestyle.

Remember, if you think you don’t need life cover, it’s not about you.  It’s about the loved ones you leave behind so they don’t suffer financially if you’re gone. 

For me, the peace of mind knowing that my little ones will have a good life even if I die prematurely, is priceless.

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