Baby on the way? Same! What you need to know for your insurances.

October has come up fast and I am excited, nervous, but mostly fizzing for our first baby to arrive. At the age where everyone seems to have just had or having a baby, I thought I would whip something together to cover life insurance planning… and apologies if this puts a bit of darker spin on what is an exciting time for you but if you don’t plan for it then you are putting your loved ones at risk.

For the purposes of this post I am only covering Life Insurance and will take you through what my partner and I have done to safeguard our future.

Our plan differs depending on who passes, however, these three parts remain the same for both of us:

Pay the mortgage off so that payment is no longer a burden on the other. This can act as long term income replacement as without a mortgage to pay one income goes much further. If you have other debts include these here (if you rent how much rent money do you want to leave behind?)

We have a fund that would provide education for our daughter through to tertiary education.

And as always final expenses, this the cost of the funeral normally $15,000

Regardless of which one of us passes the other one would need to take some time off work, but it would be a much shorter amount of time for me than it is for my partner. We would need to replace the income for the period we would be off work but would factor in that there will be no mortgage payments. Then when we are back working we need to factor in childcare costs for that period, especially before she starts school. We have some miscellaneous costs added as well to ensure long-term stability.

From those totals we deduct any realisable assets (KiwiSaver, Savings, Stocks etc.) and deduct the amount of cover we have in place.

Basically, that’s it, we now have a plan.

That plan needs to be renewed periodically because as your children get older the childcare costs decrease, the mortgage goes down over time, KiwiSaver will increase throughout working life. So as you go you can decrease your amount of cover.

I hear a lot of people talk about their insurances like they are on top of it, set and forget. A life Insurance plan isn’t something you can set and forget, you need to discuss the plan in detail with your partner, makes the plan is feasible, and review it every year.

Another thing I may hear are the likes of “my sister lives around the corner she will help with the kids” or “I think my work will be flexible and help me out”. Can you or do you want to rely on that, your family members have their own lives to lead and your employer is running a business. Be realistic and come up with what you want to happen, this is that feasibility I talked about.

I’ve heard someone describe their life cover plan as enough to leave their partner mortgage free and some “fun money” left over. Unfortunately as optimistic as that sounded they had not considered what their partner would need to maintain their lifestyle. Forget fun money, they were massively under-insured. Unfortunately, this is really common for Kiwis. Think about where you are your partner plan to be in 5 or 10 years time, this is all dependant of both of you contributing so what do you need to do so that your goals are still achieved even if you are not around.

This is an uncomfortable discussion for many but one that must happen. What is your plan, your real plan? One that could realistically be put into action should you need to.

Once you’ve had that conversation then plan for what happens if you are unable to work for an extended period due to a health event. Better yet, get in touch with an adviser like me and protect the ones you love.

So now that you have nailed this one, what if you are unable to work through a serious medical event? We will get to that shortly.