Do I need life insurance?

When buying a house or starting a family, you may find yourself asking yourself whether you need life insurance. It is a question most people ask themselves at some point in their lives, so let’s explore what life situations typically lead to considering life insurance.

If you have never looked into it before, knowing why you should have life insurance, or whether you even need life insurance, can be a bit of a complex task.

To put it simply, if there are people who depend on you financially, or may be hit hard financially in the event of your passing, you should consider life insurance to protect them.

Read the Cove guide below to find out whether you need life insurance, then jump on over to our guide on how to compare life insurance in New Zealand to help you better understand how to choose a policy based on your own life insurance needs.

Do I need Life Insurance?

If you tick any of the following boxes, then life insurance is definitely worth considering:

1. You have a partner who relies on your income;
2. You have dependents such as children, or parents, or extended family;
3. You have family living in a home with a mortgage that you contribute towards;
4. You are a stay at home parent.

1. You have a partner who relies on your income

If you are the sole earner in your family, or even if you earn substantially more than your partner, your family may be in a situation where they are unable to continue mortgage payments, rent, or other household expenses in the event of you passing away.

To put it simply, if your family relies on you bringing in an income to make ends meet, life insurance can help ensure that they are able to continue living without major disruption in the event of a claim.

2. You have dependants such as children, parents,or extended family

Life insurance isn’t just important if your partner is dependent upon your income to make ends meet. If there is anyone who depends on you financially, purchasing insurance to protect them is great idea, and why life insurance is often said to be one of the most selfless purchases that a person can make. It allows you, the policy owner, to take the financial pressure off others should you die.

If you have debt that would be passed onto surviving family members, life insurance may help to ease the burden on them by settling the debt in part or full.

3. You have family living in a home with a mortgage that you contribute towards

If you’re looking to buy a home, a life insurance policy could help cover your mortgage payments in the case of your death, enabling your family to continue living in their home.

As previously mentioned, life insurance is particularly important if you’re a substantial breadwinner in the household and the family you leave behind would be unable to continue payments without your contributions.

Purchasing a life insurance policy with enough cover to pay off (or substantially reduce) your mortgage could help your family stay in their home.

4. You’re a stay at home parent

If you’re a stay at home parent, you’re doing a lot of work that you would otherwise need assistance with, such as childcare. With life insurance, your family would be able to cover the cost of paying for these services that you are currently doing for “free”.

How much life insurance do you need?

So how much life insurance do you really need? This varies from person to person, and depends on your own personal circumstances. For this reason there is no one-size-fits-all approach, however there are a few questions that you can ask yourself when reviewing what level of cover you need.

If you passed away tomorrow, how much money would be needed to cover your financial obligations and meet your financial goals?

1. Do you have a mortgage?
2. How much would your funeral cost?
3. Do you have other debt such as credit card debt, student loans, personal loans, or items on hire purchase?
4. What are your family’s living expenses?
5. Would you like to leave some money for your children’s education?

This isn’t everything you need to consider but all of these factors will help determine what level of life insurance cover is best for you. Your advisor can help recommend how much cover you should purchase, or if you are buying online, most providers will be able to give an indication of how much cover people in a similar situation to yourself are choosing to purchase.

So do you need life insurance?

In a nutshell, if there is anyone who relies on you financially, or would face financial hardship should you pass away, life insurance is worth considering.

New Zealand’s trusted personal finance site Sorted.org.nz reinforces this view and simply states “If there are people who depend on us financially, we need insurance to protect them.”

Getting a life insurance quote, and comparing life insurance, isn’t as hard as it used to be. With new insurance technology getting a life insurance quote is actually a very quick & intuitive process.