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Personal Insurance: Which type of cover do you really need?

When it comes to personal insurance, deciding which cover to get can be overwhelming. Life insurance, income protection, trauma cover… Each sounds like a good idea, but sometimes budget dictates that you just can’t have them all right now. So how do you decide which is most important?

The first step is to find a good broker who will listen to you and talk to you about your needs and what is important to you. There is a lot to take into account, for example what life stage you are in, if you have any dependants (if so, how many and what age), how many more years you plan on being in the workforce, and so on.

While your personal situation is a key determining factor, it’s worth noting that most brokers will follow some general guidelines when advising you. To help you get your head around what is considered best practice by those in the industry, we’ve put together a brief guide to personal insurance.

It covers different types of personal insurance out there, why they are important and how they might factor into your planning. Please remember that, to make the best plan for you, it is essential to sit down and talk to an experienced broker.

Income Protection: Your income is key to everything and should be the very first thing you protect. Your ability to earn an income is the greatest asset you have and it holds everything else up. We wrote extensively about this in our blog post What is your most valuable asset?

Mortgage protection is a part of income protection and is vitally important, as for every home to lost to a fire, 48 homes are foreclosed on as a result of disability. It is hugely reassuring to know that should you be no longer able to work, your mortgage is covered.

Trauma Cover: Trauma insurance (also known as critical condition/illness, disability or total permanent disablement insurance) typically pays you a lump sum in the event of a traumatic injury or illness.

  1. There are three main reasons this type of insurance is worth considering.
    ACC will cover an injury, however before age 65 one in three people will be diagnosed with cancer, one in five will have a stroke and one in four will have a heart attack; and the average age of a trauma claim for cancer diagnosis is only 41 – none of these are covered by ACC
  2. While your income and mortgage protection will cover you being unable to work due to an illness, medical advances mean heart attacks can be caught and treated early and effectively meaning people can be back at work in four to five weeks – and most income protection policies have a four week stand down before they kick in
  3. If you have dependents and/or a spouse most polices will cover them too, which your income protection won’t. When disaster strikes it isn’t just the loss of income that costs you – travel, accommodation and special equipment costs can all add up.

The last thing your need when life takes a hard turn is additional stress about your finances, and trauma protection can at least take care of that.

Life Insurance: To find life insurance all the way down at number three on the list may come as a surprise – however it is the least claimed and the last claimed personal insurance. If you are leaving dependents behind, you absolutely must have life insurance to take care of them.

Health Insurance: In New Zealand we are lucky to have a good public health system so health insurance isn’t the absolute must have that it is in some other countries – which is why it is coming in at number four. Of course this doesn’t mean it isn’t important – you can read more about why we think it is in our blog post Do you really need health insurance in New Zealand?

Want to make a plan to protect you and your family from the unexpected? Contact us and we will discuss your unique situation and come up with the best plan for you.

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