13 Apr 2021
Being a parent comes with lots of responsibilities. The early days are full of giving in to those pregnancy cravings, decorating and furnishing a nursery and agonising over the right car seat and buggy to purchase. Once you’ve ticked those off and baby arrives, you’re in for a staggering amount of learning - feeding and sleep times, burping and nappy changing, the list goes on. Often it’s back to work while your child is still young, so researching childcare options or early childhood centres become the next hurdle to overcome. Parenting is not all first smiles and first steps! As a parent, you’re constantly making decisions and choices, not just for yourself and partner, but for the health and wellbeing of your children.
As your children get older, the decisions start changing. You’re likely to have more financial responsibilities, perhaps a mortgage, school fees, or larger grocery and utility bills. They say that children are more expensive to care for the older they get, as their needs change. An important conversation to have with your partner is around the importance of a life insurance policy. As a team, it’s a good idea to discuss the amount of cover you might need in the event of one of you passing away, and who will execute your wishes in your will and care for your dependents
Although not a comfortable conversation for many couples, it is something that comes up more as we get older. We start to observe friends and family members of similar ages to us, experience medical events, or fall victim to tragic accidents. This naturally can lead to a sense of vulnerability and concern for how we might care for our family if we’re no longer around.
New to life insurance? No problem, this article may help you better understand the peace of mind life insurance can bring to you and your family.
Need to update your life insurance policy? Great, read on for the key scenarios you need to be mindful of so you can tweak your policy to better suit your personal family situation.
Why is life insurance important for families?
Our 2020 Parenting Survey Results showed that 47% of parents thought the biggest surprise as new parents, was their life priorities changing. Starting a family is often the trigger for getting a life insurance policy, or at least researching and considering life insurance.
So, how can life insurance support your family in a time of need? Essentially, life insurance policies provide peace of mind to both you and your partner, that your family will be financially secure if one of you was to pass away. As hard as it is to think about, having a life insurance policy in place can make a huge difference to a family in tragic situations. To help alleviate the financial stress of day to day bills and mortgage payments will be hugely helpful if the unthinkable was to happen.
Top 6 considerations when choosing life insurance cover for your family
Everyone’s personal situation is different. Your life insurance policy can be tailored to your specific circumstances, so that you get just the right level of cover for your needs. Important considerations we’ll cover off below include your household budget and outgoings, level of household debt, whether both of you need to be covered under a life insurance policy and so on. Read on for more.
1. What would happen to your family if you were to pass away suddenly?
This can be difficult to think about, but it is essential when deciding on a life insurance policy. Start by asking yourself the following questions:
Have you taken the time to consider the lifestyle you’d like your family to have in the event that you are no longer around?
Would you want your family to remain in your family home, your partner to continue to not work/work part-time and so on?
Are there important things your family would miss out on if you and your income were no longer around to support them?
Think about involvement in sports, school fees, your annual family holiday, visiting your relatives, maintaining the family property etc?
What level of annual income will your family need to maintain their lifestyle?
School or university fees are important expenses to talk through too, as these can add up for multiple children and multiple years of study. You’ll also need to factor in childcare and after school care costs if your partner needs to work.
End of life costs are another inescapable cost of a loved one passing away. Noone likes to think of the loved ones they leave behind worrying about how they’re going to pay for a funeral. The costs of a funeral, finalising medical costs if you’ve been unwell, and the unexpected legal costs you can encounter when settling one’s affairs are all costs that can be covered by a life insurance policy. If you believe your family would be in a position where these end of life costs might be an issue, then a life insurance policy is something to consider.
Top tip: One of the biggest questions we get of course is around how much life insurance is enough. Check out our simple calculator, or we’ve also written a blog that outlines how much life insurance you might need. It covers some useful and common questions about types of life insurance policies, considerations around end of life expenses, outstanding debts, your dependents (children and aging parents), and forecasting for education costs and a financial safety net.
2. How much life insurance can you afford?
Like most insurance policies, the higher your coverage, the higher your premiums. Your life insurance policy can be paid flexibly, to suit you (fortnightly, monthly, bi-annually or even annually).
Life insurance premiums can be more cost effective than you expect. Starter policies can provide you cover for the cost of a takeaway coffee each week. Savings can also be gained by starting a life insurance policy when you’re younger. Young, healthy adults can get lower premiums, and you can sometimes get these rates locked in for the life of your policy.
Cigna Insurance advisers can walk you through your specific personal financial situation and make recommendations that are suited to your family and requirements.
3. How much does your family own or owe?
Did you know that some types of outstanding debt can fall to your next of kin to sort out in the event that you unexpectedly pass away? Having a Life insurance policy can ensure this situation does not play out by adding unnecessary financial pressure to your loved ones.
4. Is your family still growing?
Don’t forget that if you have life insurance, and you have more children or increase the number of your dependents (step-children, parents and so on), you’ll also need to adjust your life insurance policy.
Childcare costs may decrease over time, but education costs and household size will likely continue to increase - as will your grocery bill! Until you hit the empty nest stage, it’s a good idea to regularly review your life insurance policy and ensure it still fits your needs.
5. Do you need protection for serious health situations?
No one can plan for a terminal or critical illness, or a complete disablement. Life insurance policies can however cover these scenarios, as well as death. When you consider that you can’t provide for your family if you were to die, you may not be able to provide for them if you’re seriously ill or injured either. Life insurance policies are flexible in this regard. For example, Cigna’s LifeOne policy covers terminal illness up to a maximum life cover of $500,000.
Most of our policies have optional or added benefits to cover you for a number of conditions, such as Assurance Extra. If you’re a business owner or if your family relies heavily on your income, Income Protection Insurance might be another option to consider. Trauma Cover and Complete Disablement Cover are also useful to think about when you’re looking at life insurance options too.
Again, a Cigna Insurance adviser can help you assess the best options for your situation.
6. Do both of you need to have life insurance?
Do you need two life insurance policies if one of you is the main breadwinner? There are plenty of reasons why a stay at home parent may wish to get their own life insurance policy. Work out how much the stay at home parent contributes to the family - childcare, cleaning, meals, gardening etc. Some families choose to take out life insurance policies so that they can take care of these important domestic tasks, should the worst happen.
Losing a partner significantly impacts one’s life, especially if they have a family to take care of. Understanding your financial goals and making a plan will help to ensure your family’s peace of mind and ongoing financial security.
Keen to know more about protecting your whanau? Use our simple calculator, or contact Cigna today. A Cigna adviser can tailor a life insurance policy to suit you and your family, no matter what unexpected challenges come your way.
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