Convenient insurance products could mean you’re under-insured

Author -  Tony Maidens

Cookie-cutter, or one-type-fits all, insurance policies have their place as a safety net, but a good insurance portfolio - one that is adequate to maintain your lifestyle in the event of the unexpected - is like a good suit, it needs to be tailored to fit your specific needs.

Like fingerprints, your needs and circumstances - while apparently similar to everybody else from afar - are unique and specific to you and therefore can only be addressed through expert assessment and advice.

Results from a NZ survey conducted in 2005 indicate that a large proportion of life cover in New Zealand is linked to mortgage requirements.1

Is mortgage insurance enough?

Spicers Insurance Specialist and Authorised Financial Adviser, Tony Maidens, said he believes mortgage driven insurance is a reason why most Kiwis are underinsured.

"Mortgage related life insurance products are usually cookie-cutter type products that are fast and convenient, but may not always be a good fit for your personal circumstances.

In my view, insurance that covers just the mortgage may not be adequate for maintaining current lifestyle.

"Some financial institutions may offer life insurance products along with a mortgage. It's convenient to sign-up at the time because you are there and 'may as well get it all done in one go'. However, the life insurance may only cover the lender's liability - the outstanding debt owed to the lender - and does nothing to take care of surviving family.

"The benefit of using an adviser is that he or she can source life insurance products from different providers that are appropriate to your personal circumstances and based on an analysis of your personal circumstances. If at all possible, make sure your life insurance covers more than just your mortgage debt," Tony said.

Here are six critical factors to consider when buying life insurance:
  1. Calculate the cost of clearing all your debt, including mortgage, hire purchases and credit cards;
  2. Decide how much money your survivors will need to cover immediate expenses during the mourning period, including power bills and groceries;
  3. Budget for funeral costs;
  4. Think about what sort of future you want for your family, including tertiary education and standard of living;
  5. How much income will your surviving family need and for how long?
  6. How will your family be supported? Is your surviving partner employed or unemployed and how difficult will it be for them to find suitable work?

Tony agrees with some of the commonly cited reasons for non insurance or under-insurance. Many people who are not insured (or are under-insured) believe that the Government will help, or they have difficulty confronting the idea of death or disability.

"There are plenty of people who just don't have any insurance at all because they see the cost of it, and not the necessity of it. They can picture what might happen if their house burns down, but they struggle to see what it would be like if they died pre-maturely or couldn't work for six months.

"Either way, it is a serious financial risk to have no insurance or be under-insured. In my view insurance is an important wealth building strategy because it helps you or your family to get through the financial setback following illness or death, and it helps to maintain your family's current lifestyle and momentum, instead of having to rebuild from a weaker financial position.


1. AMP Underinsurance Survey, 2005.
The information in this article is of a general nature and does not constitute financial advice or other professional advice. To the extent that any of the above constitutes financial advice, it is class advice only. Before taking any action, you should always seek financial advice or other professional advice relevant to your personal circumstances. While care has been taken to supply information in this article that is accurate, no entity or person gives any warranty of reliability or accuracy, or accepts any responsibility arising in any way including from any error or omission. A disclosure statement is available from your adviser, on request and free of charge.

 

 

Convenient insurance products could mean you’re under-insured

Cookie-cutter, or one-type-fits all, insurance policies have their place as a safety net, but a good insurance portfolio – one that is adequate to maintain your lifestyle in the event of the unexpected – is like a good suit, it needs to be tailored to fit your specific needs.

Cookie-cutter, or one-type-fits all, insurance policies have their place as a safety net, but a good insurance portfolio - one that is adequate to maintain your lifestyle in the event of the unexpected - is like a good suit, it needs to be tailored to fit your specific needs.

Like fingerprints, your needs and circumstances - while apparently similar to everybody else from afar - are unique and specific to you and therefore can only be addressed through expert assessment and advice.

Results from a NZ survey conducted in 2005 indicate that a large proportion of life cover in New Zealand is linked to mortgage requirements.1

Is mortgage insurance enough?

Spicers Insurance Specialist and Authorised Financial Adviser, Tony Maidens, said he believes mortgage driven insurance is a reason why most Kiwis are underinsured.

"Mortgage related life insurance products are usually cookie-cutter type products that are fast and convenient, but may not always be a good fit for your personal circumstances.

In my view, insurance that covers just the mortgage may not be adequate for maintaining current lifestyle.

"Some financial institutions may offer life insurance products along with a mortgage. It's convenient to sign-up at the time because you are there and 'may as well get it all done in one go'. However, the life insurance may only cover the lender's liability - the outstanding debt owed to the lender - and does nothing to take care of surviving family.

"The benefit of using an adviser is that he or she can source life insurance products from different providers that are appropriate to your personal circumstances and based on an analysis of your personal circumstances. If at all possible, make sure your life insurance covers more than just your mortgage debt," Tony said.

Here are six critical factors to consider when buying life insurance:
  1. Calculate the cost of clearing all your debt, including mortgage, hire purchases and credit cards;
  2. Decide how much money your survivors will need to cover immediate expenses during the mourning period, including power bills and groceries;
  3. Budget for funeral costs;
  4. Think about what sort of future you want for your family, including tertiary education and standard of living;
  5. How much income will your surviving family need and for how long?
  6. How will your family be supported? Is your surviving partner employed or unemployed and how difficult will it be for them to find suitable work?

Tony agrees with some of the commonly cited reasons for non insurance or under-insurance. Many people who are not insured (or are under-insured) believe that the Government will help, or they have difficulty confronting the idea of death or disability.

"There are plenty of people who just don't have any insurance at all because they see the cost of it, and not the necessity of it. They can picture what might happen if their house burns down, but they struggle to see what it would be like if they died pre-maturely or couldn't work for six months.

"Either way, it is a serious financial risk to have no insurance or be under-insured. In my view insurance is an important wealth building strategy because it helps you or your family to get through the financial setback following illness or death, and it helps to maintain your family's current lifestyle and momentum, instead of having to rebuild from a weaker financial position.


1. AMP Underinsurance Survey, 2005.
The information in this article is of a general nature and does not constitute financial advice or other professional advice. To the extent that any of the above constitutes financial advice, it is class advice only. Before taking any action, you should always seek financial advice or other professional advice relevant to your personal circumstances. While care has been taken to supply information in this article that is accurate, no entity or person gives any warranty of reliability or accuracy, or accepts any responsibility arising in any way including from any error or omission. A disclosure statement is available from your adviser, on request and free of charge.

 

 

Convenient insurance products could mean you’re under-insured
Important information

The content on this website is for information only. The information is of a general nature and does not constitute financial advice or other professional advice. Before taking any action, you should always seek financial advice or other professional advice relevant to your personal circumstances. While care has been taken to supply information on this website that is accurate, no entity or person gives any warranty of reliability or accuracy, or accepts any responsibility arising in any way including from any error or omission. A disclosure statement is available from your adviser on request and free of charge.

 

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