Getting Engaged? Get Your Finances Sorted
There are a few conversations that should broach with your partner at this stage of life — such...
Unfortunately some parts of the Cigna New Zealand website don’t work properly on your browser version, please update your browser and try again.
If you’re juggling work as well as a family, child care costs can really eat into your paycheck. That’s why having one parent stay at home with the kids makes sense for a lot of New Zealand whānau. In the 2017 Household Labour Force Survey, Statistics New Zealand says that 22.3% of people not in the labour force listed raising children as their main activity.
So what is the best Life Insurance option for you, if your coworkers call you Mum or Dad? Do you even need cover? What is Life Insurance needed for if you’re a stay at home parent?
The short answer if you’re speed-reading this while the kids have their afternoon nap is yes, you probably do — for quite a few reasons other than just covering child care costs. If you’re not on a salary you’re saving your household a lot of money each week as a stay at home parent or homemaker. The unpaid domestic labour you do looking after dependents and the household is a full time job! So if something happened to you, does your partner earn enough to afford help with the kids and house?
Whether you’ve already got a growing whanau, or kids are in your future plans, it’s important to make sure you’re ensuring the financial security of your loved ones
The first step is working out if Life Insurance is the best option for your life stage. Here at Cigna we provide you with tools to make an informed and objective decision. After you’ve read this guide, you can explore your options further with our Life Insurance calculator and blog, or chat to our team..
Is your partner the primary breadwinner? Families often assume that only the partner who earns a regular paycheck needs Life Insurance. This is often incorrect for a couple of reasons.
The first is that they often haven’t considered the repercussions of not covering the stay-at-home parent. We’re going to look into this more in the next section, but it’s important to quantify how much the stay at home parent contributes in domestic labour. Could the household get by if this was no longer available?
The second is that they believe the amount of insurance cover provided by the working partner’s provider is enough for the family. This will depend on your personal situation — get in touch with one of our consultants who will be able to advise whether you have sufficient cover. And remember — Cigna will never recommend you Life Insurance if you don’t need it.
This figure will depend on your personal household situation, how you distribute your income, as well as your financial priorities. Here are some factors to consider when you’re trying to work out how much staying at home is saving your household:
If something happened to the stay at home parent, could the breadwinner cover this figure with their income?
If you think the answer for your household is yes, have you thought about future financial goals your family may need to save for? If childcare, household maintenance and support costs would limit the breadwinner’s ability to save for your kid’s tertiary education, for example, you should consider Life Insurance for the stay at home parent to make sure you can cover this savings goal.
Life Insurance is a future-proofing measure. When you’re deciding if you want to get cover, you need to think about the kind of future you want your family to have — and then plan accordingly for if something happens.
Considering some key lifestyle factors will help you narrow down your options. Do you want the mortgage paid off on your house? How are you going to manage these mortgage repayments? Do you want to help your children through university, and if so, how much are you willing to contribute to their tuition fees and other expenses?
Your Life Insurance can be used to leave your children a nest egg — this inheritance can give them a head start in adulthood and ensure that they’re sorted, no matter what they want to do with their lives.
How does this work? A Life Insurance claim is paid out in accordance with the life insured’s will. So if the insured’s children are listed as beneficiaries in the will, they will receive a lump sum from Cigna if the insured were to pass away. Of course, this sum is determined by the Life Cover outlined in the policy, which is why it’s really important to work out how much cover you’d need to set your kids up for the future.
After all of this financial chat, let’s be honest. If you do pass away, covering the financial value of your unpaid domestic labour is going to be one of the last things on your family’s minds. Losing a parent is a deeply traumatic for a child.
Life Insurance can be used to cover the working parent taking time out from their job to grieve, and help your children adapt — whether that includes starting at a new daycare, hiring a nanny, or getting used to life without a parent.
It’s a worthwhile exercise to sit down with your partner and have a conversation about what would happen if one of you were to pass away while raising children. Try to put monetary values on these factors if you can, starting with these questions:
Working out how life will go on after the death of you or your partner makes it easier to get a Life Insurance quote from Cigna when you know roughly how much cover you’ll need. After your ‘what if?’ conversation, here are some phase two questions to think about:
There are, of course other ways to gain financial security as a stay at home parent. Your Kiwisaver can be used to buy your first property assets as well as sorting you out for retirement. Of course, stowing away money where you can will also help. Actively investing some of your household income can also be a canny way of building financial security.
Whatever way you choose to safeguard your lifestyle, chat to Cigna first to help you explore your options.