Life insurance for new parents

Before the baby, a couple could reasonably conclude that the survivor would go back to work and manage. After the baby, that logic breaks in two places at once. The surviving parent has less capacity to work, not more, and the household has a new fixed cost that runs for the better part of two decades.

The number people arrive at is usually the mortgage. The number that reflects reality is the mortgage plus the cost of raising a child to independence on a single income, plus enough that the surviving parent can take time off in the first year without the house being at risk. That is a larger figure than most new parents expect, and it is also the cheapest it will ever be to insure, because you are as young now as you will ever be.

There is a second, quieter change. Your policy documents were written when your affairs were simple. A beneficiary nomination made at 24 pointing at a former partner or a parent does not update itself when a child arrives.

A life insurance payout does not automatically go to your child. It goes wherever the policy structure sends it, and if the structure is silent it goes into your estate, where it is subject to your will, the estate’s debts and — above a threshold — probate.

For most new parents the practical answer is a combination: cross-owned or nominated cover so the surviving partner is paid quickly, plus a will that appoints a testamentary guardian and directs what happens if you both die. The second scenario is the one nobody wants to discuss and the one where unplanned money does the most damage.

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

• The time limit and evidence requirements on your special events or future insurability benefit.
• Whether your beneficiary nomination is current, and whether your insurer treats it as binding or as a guide.
• Whether the policy includes a bereavement or advance payment benefit that releases funds before probate.
• Whether child trauma cover is bundled in, what it costs separately, and what conditions it actually names.
• Income protection sized to your pre-baby income, if one of you has since dropped hours — indemnity policies pay on what you were earning at claim.
• Parental leave changes household cashflow. Cancelling cover to get through a tight year is the decision people most regret.

Every New Zealand insurer writes family life and trauma 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.

• Sizing for duration rather than for the debt, and showing the difference in premium between the two.
• Structuring ownership so the survivor is paid without waiting for probate.
• Making sure the special events increase is exercised before the window closes.
• Balancing life, trauma and income protection within a real budget rather than recommending all three at full size.

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.