What is life insurance – and do you really need it?
Life Insurance is love insurance, there to protect those you care about most.
What would happen to your family and loved ones if the unimaginable were to happen? Life insurance is a lump sum of money that can get paid out if you pass away or get diagnosed with an illness or injury likely to result in you passing away within the next 12 months. It’s a bit like a safety net, giving you peace of mind that your loved ones could pay off the mortgage and any debts, or take care of things like the kids’ education.
Life insurance is a type of insurance, but instead of helping to cover the cost of your car or house, it is designed to help your family with the financial impact if something were to happen to you.
How life insurance works
You can choose how much cover you’d like. The cover is the amount that will be paid out to your loved ones if you pass away or are diagnosed with a terminal illness.
A life insurance pay out can be used to help with:
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Funeral costs
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Paying off the mortgage
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Paying off bills, credit cards and on-going expenses
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The cost of childcare or care for a dependant
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The cost of your children’s education
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Your partner’s retirement needs
Find out how much life insurance could cost you with our quick and easy quote.
How much life insurance do I need?
The amount of life insurance cover you need is a personal choice. Although thinking about ‘what might happen’ if you pass away isn’t something many of us like to think about, it’s a good idea to consider the following when assessing how much life insurance cover you may need:
Your financial obligations. For example, the amount left to pay on your mortgage or any debts you may have (like credit card bills). You might want these costs to be covered by life insurance so your family don’t have to pay them if you die.
Funeral costs. Funerals usually need to be arranged and paid for promptly.
Income for family and loved ones. If you have children, dependants or a partner who relies on you (and your income), you might want to factor in how much might be helpful to them in terms of income.
Living expenses. How much financial support you and your family may need if you are diagnosed with a terminal illness and are unable to work.
Life insurance example:
36-year-old Leah has a $300,000 mortgage, owes $10,000 on a car, and has $30,000 saved in a KiwiSaver fund. Leah wants to make sure her family won’t be left with any debts if something happened; she’d like the mortgage to be paid off and funeral costs paid for. She’d also like her family to have a little bit left over to cover childcare costs, or to help the kids get started at University one day if she wasn’t there to support them.
Leah adds up the debts and costs she’d like covered (mortgage, childcare costs) and reduces this total amount by the savings she has (KiwiSaver) and any amount her partner might be able to cover from his annual income. Leah decides to take out $250,000 in life insurance cover.
Life insurance cover calculator
Try our no-obligation, quick and easy tool to calculate how much life insurance could work for you.
Who needs life insurance? Do I need life insurance if I have a mortgage?
While many people may see life insurance as optional, big life events like buying your first home, getting married or having children might change how you feel about the importance of having life insurance. Even if you already have life insurance, it’s a good idea to regularly review your level of cover – particularly after a big life event.
Homeowners may choose to get life insurance so that their loved ones can pay the mortgage if the insured person passes away or is diagnosed with a terminal illness.
Couples may choose to get life insurance so they can pay the bills and cover funeral expenses if their partner passes. If you have children or a dependant, you might choose to get life insurance to help support them financially if you pass away or are diagnosed with a terminal illness.