Life is full of unexpected events, some of which can get in the way of your financial wellbeing. That’s where personal insurance comes in. However, according to a recent survey by the Financial Services Council (FSC), many Kiwis are still underinsured.

Here at SHARE, our goal is to help more and more families see and understand the power of a tailored insurance plan. So, here are some key things you need to know.

The problem with underinsurance

The FSC “Money and You” report recently shed a sobering light on New Zealand underinsurance. They found that only 38% of respondents had life insurance, and only 11% had income protection insurance.

The FSC also estimates that:

• Nearly nine in 10 Kiwis are likely to be impacted financially should they lose their job.
• Eight in 10 Kiwis may struggle to support their families if they had a serious accident and could no longer work.
• Eight in 10 Kiwis may also face financial difficulties if they were diagnosed with a critical illness.
• Should they suddenly pass away, six in 10 Kiwis would leave their families to financially cover things like mortgage repayments and living expenses.
• Nearly seven in 10 Kiwis don’t have health insurance, meaning they rely on the overwhelmed public healthcare system to get health care.

How personal insurance can step in

Personal insurance, in its many shapes and forms, is designed to provide welcome financial support in times of need. And by tailoring your insurance plans to your situation, you can achieve invaluable peace of mind.

Life insurance, for example, pays out a lump sum in the event of death, while income protection can pay a regular replacement income if you’re unable to work due to illness or injury.

Then, there’s health insurance: a solution designed to give people more choice when it comes to seeking medical treatment, with some policies even covering non-Pharmac funded medications.

Lastly, trauma insurance (also known as critical illness cover) can pay out a lump-sum amount if you’re diagnosed with one of the serious illnesses listed in the policy (usually including cancer, strokers and heart attacks).

The ‘right’ level of cover matters

Getting cover is a good first step, but it’s also not enough. With many options to choose from and ever-changing circumstances, the key thing is to find the right level of cover for you and adjust it over time.

If you have a mortgage, for example, you may want to get life cover to protect at least your family’s ability to pay off the mortgage. But depending on your needs, you could also choose to have a higher level of cover so you can also provide for children’s future education or a replacement income for the surviving partner.

As for income protection, it’s crucial to select an appropriate waiting period and claim payment period, based on your financial commitments and emergency funds. Income protection is designed to replace up to 75% of your gross pre-disability income, and you can select a waiting period (usually four, eight or 13 weeks) before your policy kicks in. Plus, you can choose a claim payment period, which could be for two years, five years or until age 65 or 70. Claim payments stop when you return to work.

We’re here to help

Peace of mind – this is what a tailored insurance plan can give you. And as insurance advisers, we’re here to ensure you get that. We can help you assess your circumstances and find the appropriate level of coverage to protect your financial well-being.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.