Life insurance and adult children

The conventional milestone — the youngest child turns eighteen, the cover comes down — describes a household that no longer exists for many New Zealand families. Adult children stay at home longer, study longer, and buy houses with parental help. A parent in their fifties may be financially entangled with a twenty-eight-year-old in ways they were not with a twelve-year-old.

The sharpest version of this is the guarantee. Where parents have gone on a child’s mortgage, or provided a family loan secured against their own home, that exposure does not end at death. A guarantee is an obligation of the estate, and the estate may have to satisfy it before anything is distributed. Families discover this when a lender writes to the executor.

The other version is permanent dependency. A child with a significant disability may need support for their whole life, and their parents are usually the ones providing it. The insurance question there is not how much until they are eighteen, but how much for the rest of their life, and who will administer it — which makes it a trust question as much as an insurance one.

The disabled adult child

Providing for a child who will always need support is one of the few situations where a substantial, permanent life policy is unambiguously right. The complication is not the sum insured — it is what happens to the money. A lump sum paid directly to a person who cannot manage it, or paid into an estate distributed equally between siblings, can undo years of planning.

The usual answer is a trust, established with a lawyer, with trustees who understand the arrangement and a deed that says what the money is for. The policy is owned by or paid to the trust, and the trustees apply it over that person’s lifetime. This needs proper legal drafting, and it needs siblings to be told about it while everyone is alive.

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

• Every guarantee you have signed for an adult child, including facilities you may have forgotten.
• Whether a family loan is documented, and whether it would be enforceable against a child’s estate or their partner.
• Whether a child’s relationship property position affects money you intend for them alone.
• Whether trust ownership is needed for a disabled child, and whether the trustees have actually agreed.
• Whether a child benefit under your policy is close to its expiry age.
• Whether paying an adult child’s premiums creates any issue for them or for your estate planning.

Every New Zealand insurer writes family cover with grown children 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.

• Identifying guarantees and family loans that create an estate exposure nobody has quantified.
• Sizing permanent cover for a disabled child, which is a lifetime calculation rather than a term one.
• Working alongside a lawyer where a trust is required, so ownership and the deed agree with each other.
• Finding and exercising conversion options in existing family policies.

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.