Insurance through life: Empty Nest

This is general advice, intended to help you understand what is available, what questions to ask and key factors to consider – you need to seek advice from an insurance adviser before buying insurance.

Insurance should never be a “set and forget” purchase – it should be dynamic and follow you through life. As life changes, the types of insurance you need, how much you should be insured for, and the costs of the premiums all change. Understanding this means you know which questions to ask your adviser and can make informed insurance decisions.

Children leaving home is a significant change and is a great time to review your insurance to make sure it is still meeting your needs.  

Empty Nest

Whether it is a source of celebration or tinged with grief, the empty nest is a huge milestone and comes with multiple lifestyle and financial changes.

Some people entering this stage will be mortgage free, and others will have a much lower mortgage. If you are renting you may be able to downsize, lowering rent payments. With fewer people sharing the home, daily livings costs reduce dramatically, as you go through less food, power and water.

In insurance terms this all means your dependency risk is lower, which means the impact of being unable to work is less catastrophic. If you have a mortgage or are mortgage free, you will also have higher equity, which means you have more financial options available to you. You’ve likely had a few pay rises in your career, and are generally more financially comfortable.

When deciding how to structure your insurance you may be less focused on preserving your day-to-day living costs, and more focused on building a solid foundation for retirement. We typically see a lower need for life cover and income protection at this stage, but health and trauma cover become more relevant than ever.

Lump-sum insurance policies

These insurance policies pay out a lump sum in the event of an accident or certain illnesses. They are not offset by ACC (meaning you can claim both at the same time).

These types of insurance are often used to extinguish debt, or to temporarily cover living costs. If you have low debt or high savings this should be taken into account when deciding how much cover to get.

Life insurance

This policy pays out in the event of your death, so you need to think about what you want it to cover. As people get older, and often more financially stable, life insurance premiums do rise, so it often makes sense to reduce the amount insured. Talking to your insurance adviser is key as they can help you make the right choice for your circumstances. 

Trauma insurance

As income protection and life insurance become more expensive, and the pay-out period for income protection drops, trauma cover becomes a key player in your insurance planning and a great way to protect your livelihood.

Trauma protection pays out a lump sum if you suffer particular injuries or are diagnosed with specific illnesses. Different providers have slightly different lists of illnesses or injuries, but all include cancer, heart attack and stroke. Injuries can include head trauma, burns or time spent in intensive care.

Total and Permanent Disability insurance (TPD)

TPD insurance is still highly relevant at this life stage, as the costs and lost income of a total and permanent disability would significantly impact your quality of retirement. This insurance is paid out in a lump sum if you were to become totally and permanently disabled through injury or illness. It also includes funds to modify a home.

Income and mortgage protection

As you get older your insurance premiums tend to rise. With income protection there is the added complication of the cover expiring when you reach 65 or 70, so the older you get the less your pay-out will be. This needs to be considered when you discuss your options with your adviser, and is one of the reasons we recommend increasing trauma cover.

Income protection is linked to your income and paid monthly after a standdown period following an accident or diagnosis of an illness. While ACC covers injuries, it doesn’t cover illnesses, which income protection does.

Health Insurance

If you have health insurance in place you are well set, as you get older your chances of needing to use it increase. If you don’t have health insurance in place this is a great time to consider setting it up. It is never too late to get health insurance.

As you get older your chances of having pre-existing conditions that are not covered by your policy does increase, and people can find this off-putting. However, it is important to remember that even if you have 15 conditions that are excluded from the cover, there are over 3000 illnesses covered by health insurance policies. This means even with exclusions you will have great cover.

If you are ready to get the best cover for your life stage, or want to discuss whether your current insurance is still fit for purpose, get in touch with one of our advisers.