Life insurance for stay-at-home parents

Price the loss before you decide it is not worth insuring. If a parent at home dies, the household does not simply continue with one fewer person in it. Preschool care has to be bought. School holidays have to be covered. Someone has to be there at three o’clock. The surviving parent either pays for all of that or reduces their own hours, and in practice most do both — which means the household loses income and gains expenses in the same month.

That combination is what makes the number bigger than people expect. A conservative way to size it is to add the annual cost of replacing the care to the income the working parent would give up, then decide how many years that continues for. Until the youngest is at school is the minimum. Until the youngest is independent is the honest answer.

The other reason to insure both lives is that it costs very little to do it now and a great deal to do it later. A parent at home in their early thirties is at their cheapest and healthiest. Waiting until they return to work means underwriting whatever health has happened in the meantime.

The home duties TPD definition

Standard TPD definitions ask whether you can return to your occupation, or to any occupation you are suited to. Neither works for someone whose full-time job is unpaid. The home duties definition instead asks whether you are unable to perform normal domestic duties — cooking, cleaning, caring for children — and typically requires that the incapacity be permanent and confirmed by a medical practitioner.

It is a narrower definition than it first sounds, and the wording varies significantly between insurers, including on whether a period of confinement is required first and how long the disability must have continued. That variation is worth reading before you compare on price.

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

• The insurer’s maximum sum insured for a life with no earned income, which caps what you can buy regardless of need.
• Whether the TPD definition offered is home duties, any occupation, or activities of daily living — they are not equivalent.
• Whether the home duties definition reverts to an any-occupation test after a period, which some wordings do.
• Whether returning to paid work changes which definition applies, and whether you need to tell the insurer.
• Whether the policy allows the sum insured to increase later without new medical evidence when you return to earning.
• Whether child trauma cover is included or added, given the household is already exposed to one parent stopping work.

Every New Zealand insurer writes cover for a non-earning parent 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.

• Knowing which insurers currently apply the most generous non-earner limits, and which definitions are the least restrictive.
• Putting a defensible number on the replacement cost so the application is not capped for lack of justification.
• Structuring both parents’ cover together, so the household is balanced rather than the earner being over-insured.
• Planning the transition when the non-earning parent returns to work and income protection becomes available.

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.