What to look for in family life insurance

Family cover is a structuring problem more than a product problem. The products are the ordinary ones — life, trauma, TPD, income protection — but who holds them, in what amounts, and how they interact is what determines whether the household actually survives a bad year.

The most common structural mistake is insuring only the higher earner. If one parent is at home with children, replacing what they do — childcare, school runs, the domestic work that makes the other parent’s job possible — is a substantial ongoing cost. It does not vanish because there was no salary attached to it.

The second is buying a joint policy because it looks cheaper. A joint life policy typically pays on the first death and then ends, leaving the survivor uninsured at an older age and in worse health. Two single policies pay twice if both die, separate cleanly if the relationship ends, and can be structured differently from each other.

1. 1Insure both adults. For the earner, size against income replacement and debt. For a parent at home, size against the cost of replacing their unpaid work until the children are independent.
2. 2Prefer two single policies over one joint policy unless there is a specific reason not to. Check whether the insurer charges the policy fee per policy or per life, because that changes the cost of doing it properly.
3. 3Protect the income first. For most families the likelier event by a wide margin is not death but a period of illness or injury that stops someone earning. Income protection or mortgage repayment cover addresses that; a larger life sum insured does not.
4. 4Set the term against the youngest child. Take the later of the date the mortgage is repaid and the date the youngest child becomes financially independent, and hold cover at least that long.
5. 5Ask about child trauma cover as an option rather than a product. It is usually inexpensive, and its real value is that it buys a parent time off work rather than paying for treatment.
6. 6Check the future insurability benefit. A new baby, a bigger mortgage or a salary rise should be able to lift your cover without new medical evidence, and the triggers and caps differ between insurers.

These are the details that decide whether the cover does what you expected. Read them before you compare on price.

• Whether a joint policy ends after the first claim, leaving the survivor uninsured.
• Whether cover on a parent at home has been sized at a token amount rather than against the real cost of replacement.
• Whether beneficiaries and policy ownership are set up so the money reaches the household quickly.
• Whether the trauma cover is accelerated, reducing the life cover the family relies on when it pays.
• Whether indexation is on, and whether the rising premium remains affordable.
• Whether employer-provided cover has been counted — and whether it ends when the job does.

Every New Zealand insurer writes family cover to its own wording, and the words are where the money is. Two policies that look identical on price can pay very differently when it matters. Closing that gap is the entire job of an adviser.

• Structuring cover across two lives, with different premium structures if that suits, is not something a quote screen does.
• An adviser sizes cover on a parent at home properly, which online calculators almost never do.
• Policy fee treatment — per policy or per life — changes the cost of two single policies, and an adviser models the total.
• Where one parent has a health history, an adviser can place that life with the insurer most likely to take it well while placing the other elsewhere.
• An adviser reviews the structure as children get older and the need shrinks, which is when cover should be reduced rather than cancelled.

There are three ways to buy life cover in New Zealand, and they are not equivalent. You can buy direct from one insurer, which means you see one product range and one underwriting appetite. You can buy through your bank, which usually means a single insurer’s product sold under the bank’s brand, often with narrower definitions. Or you can go through an adviser, who quotes several insurers at once and is required to put your interests first.

The premium you pay is the same either way. Insurers build adviser commission into their pricing whether or not an adviser is involved, so going direct does not get you a discount — it just removes the person whose job is to argue your corner at application and at claim time.

• An adviser can see which insurer is currently taking your health history on standard terms, and which one will load or exclude it.
• An adviser can structure cover across two insurers if that produces a better outcome than putting everything with one.
• An adviser handles the underwriting back-and-forth, and is the person who chases the claim when a family is least able to.
• An adviser has to document why the recommendation suits you, which is a written record you can hold them to.

We are a referral service, not an insurer. We do not quote premiums and we do not sell policies. What we do is put you in front of one licensed New Zealand adviser who can compare the market properly.

1. 1

   You tell us what you are looking at

   The form takes about a minute. Nobody asks for your medical history on a web form — that conversation happens with the adviser, properly, and only once you have decided to proceed.

2. 2

   An adviser calls you

   A licensed New Zealand adviser talks through your situation: who depends on you, what you owe, what you already have in place, and what you are actually worried about.

3. 3

   They compare the market

   The adviser quotes across the major insurers, checks which of them will take your health history on the best terms, and puts the options side by side in writing.

4. 4

   You decide, in your own time

   There is no obligation and no cost to you. If the answer is that you already have enough cover, a good adviser will tell you that.