I often get asked this question and this is my answer; It’s not about them it is about you. There are so many factors to consider when thinking about how much Life cover you need, but most importantly you need to consider what is your Plan B. If the unexpected happens, which it frequently does, are you covered.
I met a lady at a function recently who shared with me her experience of trying to get Life Insurance from a bank. They gave her this advice; “if your husband is the major earner in the family you don’t need life insurance, you should just cover your funeral costs”. To be honest this person should be sacked, they didn’t even ask this lady if she had any dependants.
Some families with young children have a strong extended network, capable grand parents who can step in to help, but others have none. Some people may choose to move closer to family support whereas others may need to pay for additional support. Everyone’s situation is unique, but here’s some important factors to consider when assessing how much cover you might need.
- Funeral costs – NZ
- Funeral costs – Overseas. Immigrants may wish to be buried in their home country
- Clear enough debt so that the surviving adult can maintain the mortgage payments (keep the house)
- Clear the mortgage
- Leave a buffer, one or two years income, so the surviving person can have time off or pay for child care/nanny.
- Leave a buffer, enough money to run the house until the kids are all at primary school
- Leave a buffer, enough money to run the house until the kids are all at secondary school
- Leave money to pay for private schooling.
- Leave money to pay for university fees
- Leave a lump sum that, in conjunction with an investment adviser, can provide an ongoing income.
- Leave money to clear debt on an investment property to provide ongoing income
- Have a life policy on your ex-partner that decreases each year to cover their child support should they pass.
One final thing to consider.
Life insurance will pay if you die or are diagnosed with a terminal illness, this means if a medical specialists says they expect you to pass away within 12 months’ time. A terminal illness payment will enable you to see some money before you pass. In this situation you may spend some of the funds on treatment (non pharmac medicine) or on bucket list items, trips, experiences. If you have cover in place to clear the mortgage and then spend $100,000 – $200,000 in your last 12 months this can leave a shortfall.
If you would like to discuss how much cover you may need please contact us.