Life insurance for blended families

Blended families create a problem that intact families do not have: two sets of beneficiaries whose interests do not automatically align. You want your partner secure in the house. You also want your children from your first relationship to receive something. Those two aims compete for the same assets, and the usual estate plan — everything to my spouse — resolves the competition in favour of one side.

The mechanism people rely on is trust. Your partner will look after your kids. Often they will. But they will also remarry, or need the money for their own care, or make a new will, and after your death none of that is within your control. The house that was going to be split is now theirs to leave to whoever they choose.

Life insurance solves this in a way that no amount of goodwill does, because it creates a second pool of money rather than dividing the first. Cover on your life, structured so it pays directly to or for your children, means the family home does not need to be sold and nobody has to be disinherited to make the arithmetic work.

The point of the structure is that it operates independently of your surviving partner’s future decisions. That means it should not depend on your will alone, and it should not sit in the estate where it can be claimed against.

For most blended families the workable answer is layered. Cover sized to the mortgage, nominated to your partner, so the house is safe. A separate policy sized to what you want your children to receive, owned or directed so it reaches them without passing through the estate. And a current will that explains the whole arrangement, so nobody is surprised.

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

• Whether your partner’s children and your children are treated differently by your will and your policies, and whether that is deliberate.
• Any obligation surviving from a previous relationship — maintenance, child support or a property agreement — that needs its own cover.
• Whether a former partner is still the owner or the nominated beneficiary of any policy on your life.
• Whether a policy paid into your estate could be caught by a Family Protection Act claim, and whether trust ownership avoids that.
• Guardianship. A testamentary guardian appointed in your will is a separate question from who receives the money.
• Contracting-out agreements between you and your current partner, which should be drafted with the insurance visible.

Every New Zealand insurer writes cover for a blended family 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.

• Working out how much cover each objective needs, so the house, the children and the surviving partner are each solved separately rather than fought over.
• Getting policy ownership right at application, which is far cheaper than restructuring an existing policy later.
• Coordinating with your lawyer so the wills, any trust and the policies say the same thing.
• Reviewing the whole structure when circumstances change — a new child, a sale, an adult child becoming independent.

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.