Your guide to choosing the right personal insurance products for yourself and your family
The right personal insurance cover can help you tackle life’s twists and turns, but it’s not always easy to know what types of cover are best for your unique situation. In this guide, we break down the different types of personal insurance available, and what you should consider to help you adequately protect yourself and your loved ones.
Assess your financial situation
Before diving in, it’s important to fully assess your current financial situation, including:
Income and expenses: Evaluate your income streams and monthly expenses to determine your financial stability and obligations. When you understand your earning, saving and spending patterns, you can make smart choices that match your current personal insurance needs and future goals.
Financial goals: Consider your short and long term financial objectives, such as buying a home, saving for retirement, or funding your children’s education. Defining your goals will bring clarity to your situation, enhance your financial well-being, and empower you to make choices that align with your aspirations.
Health and lifestyle: Assess your health status and lifestyle habits, as they can impact the type and level of insurance cover you need.
Consider dependents
If you have dependents relying on you financially, such as a partner, children, or ageing parents, their needs should be a main consideration when selecting personal insurance policies. Understand the financial responsibilities you have towards your dependents and how insurance can provide support in various scenarios, such as loss of income or unexpected medical expenses. Also think about your dependents’ future needs, such as ongoing living expenses, education costs, and mortgage or debt payments.
Understand the different types of cover available
Income protection insurance
Income protection insurance, also known as loss of earnings insurance, replaces up to 75% of your income if you’re unable to work due to temporary illness or injury. It can be particularly important if you have people to care for or if your family relies on your income. With this kind of personal insurance, benefit claims can range from a couple of months to several years. You’ll also choose the ‘waiting period’ before benefits kick in, so you’ll need to factor in the cost of premiums as well as your ability to cover expenses during the waiting period.
Ensuring you have a robust income protection plan in place will allow you to claim benefits on an ongoing basis or whenever needed until age 65 or 70, whether due to the same or varying health challenges. At Blue Canoe, we recommend our clients secure an income protection policy which would provide a regular income right through to retirement age. And depending on the package chosen, clients may claim their ACC entitlement plus receive an additional top-up from their income protection insurance.
Disability insurance
While income protection insurance replaces a portion of your income temporarily, disability insurance, also known as total and permanent disability (TPD) insurance, provides a lump sum payment if you suffer a disability that prevents you from working again. When selecting TPD cover, it’s important you understand the criteria for total and permanent disability, as definitions may vary between insurance providers. TPD insurance gives you the freedom to choose how you’ll use the funds. Planning how you’ll use the payment is important – whether it’s for mortgage repayments, medical expenses, ongoing care, or even investing it.
Health insurance
We’re fortunate in New Zealand to have a public health care system and a government funded drug buying agency (PHARMAC). However, New Zealand’s system of evaluating and funding medicines often leaves us without immediate access to new medicines and vaccines which are considered standard in other OECD countries. What’s more, we’re seriously short on nurses, doctors and other health care professionals. The result: extensive waitlists for surgeries and prolonged delays in accessing essential medicines.
Health insurance provides you with valuable options for managing your health and well-being. It can be one of the fastest ways to a speedy recovery, enabling you or your family members to skip long waitlists for specialist medical treatments, surgeries and more. It’s no wonder 1.45 million New Zealanders have health insurance. Around a quarter of NZ’s health insurance claims come from customers aged younger than 45 for a range of services from dental care to specialist consultations, diagnostic tests, and surgeries, and for non-pharmac funded medicines.
Private health insurance heavily supports the public system, funding about half of all elective surgeries. Most insurers offer plans from minor to comprehensive coverage. When you opt for a health insurance policy, we help you get the balance right between comprehensive cover and affordability. It’s wise to prioritise cover for costly medical procedures and for medical care beyond what you can manage from your savings or assets. Additionally, consider selecting a higher excess of $500 or $1,000 to secure more budget-friendly premiums.
Trauma insurance
As New Zealanders are increasingly surviving illnesses that have been previously terminal, we’re seeing more and more Kiwis opt for trauma insurance policies. Regardless of your ability to work, trauma insurance pays out a lump sum upon diagnosis of certain critical illnesses, offering financial support during challenging times. Think about trauma insurance as ‘living insurance’. Before securing a trauma policy, make sure you review the list of critical illnesses covered by the policy and ensure it aligns with your health concerns and family medical history. Like disability insurance, you choose your level of cover and how much your lump sum benefit will be.
Life Insurance
Life insurance provides financial protection to your loved ones in the event of your death or if you’re faced with a devastating terminal illness diagnosis with less than 12 months to live. Life insurance policies help to ensure that your family can maintain their lifestyle and continue to meet financial obligations. Calculate the appropriate cover amount based on your family’s financial needs, including mortgage or rent payments, children’s education expenses, and ongoing living costs. There are different types of life insurance policies to fit your needs and budget. Some policies offer the option to increase your premiums, unlocking an additional lump sum benefit upon a terminal diagnosis with less than 12 months to live. This extra support can enhance your quality of life during your remaining time.
Determine the level of risk you’re comfortable with
Lastly, assess your risk tolerance to determine the level of insurance cover that aligns with your financial goals and comfort level. Ask yourself “how much financial risk am I willing to take on in different scenarios?” Strike a balance between the cost of insurance premiums and the level of cover needed to protect against potential financial risks.
Consulting with a trusted financial adviser can provide the clarity and confidence you need to make informed personal insurance decisions. At Blue Canoe, we provide honest, independent advice to guide you in choosing the best personal insurance solutions for you, your family, and even your business.
Whether you’re reassessing your needs or just exploring the options, book a free discovery session with one of our advisers today.
