Life Insurance

Kiwi new parents guide to life insurance

Welcoming a little one into the world? Congratulations on the start of this exciting journey. You're probably juggling a lot of emotions and decisions right now. Cloth or disposable nappies? Bassinet or cot? Where will the baby sleep?

And then, of course, there's the financial side of things. According to an Inland Revenue study raising a child in New Zealand to the age of 18 costs an average of almost $250,000, excluding the cost of childcare or a parent's loss of income.

It's just a ball-park figure, but it highlights the importance of protecting your ability to provide for your child. And personal insurance can help you do just that. It's about taking care of the curveballs that life might throw at you, giving your family future-proof peace of mind.

Some key questions to ask yourself

Life insurance is something you take out in the hope you'll never have to use it. And even though no one likes to think about it, anyone can benefit from considering those uncomfortable what-if questions.

To decide whether you need life cover, think about what would happen if you or your partner were diagnosed with a serious illness, or worse, were no longer there.

  • Would your family be able to meet rent or mortgage payments?
  • Would your family be able to pay off other debts like credit cards or personal loans?
  • Would your family be able to meet day-to-day expenses, and for how long?
  • Would your child's future education costs be covered?
  • And what about funeral expenses?

Life insurance is designed to provide your loved ones with a lump-sum amount that they can use as they like and need. And depending on the amount you choose, it could help them cover both their immediate and future needs, protecting their lifestyle and lifetime goals.

Life insurance and stay-at-home parents

It's a common misconception that only the breadwinner in the household needs life insurance. In all reality, life cover is often worth considering for stay-at-home parents too, and here's why.

Even though stay-at-home mums and dads don't earn an income, they do a lot to keep the household ticking over, including childcare and household maintenance. If they were no longer around, how would your family cope? Would the breadwinner need to work fewer hours, to take care of cleaning, gardening, cooking and childcare? Or maybe more hours, to afford the cost of hiring a cleaner, a baby-sitter, a gardener, etc?

There's a lot to think about, so if you're unsure where to start, please don't hesitate to contact our friendly insurance advisers at LifeDirect. We can help you answer these and other key questions, including...

How much life insurance do you need, as a new parent?

As you can imagine, many factors go into that number. Here are some key questions to get you thinking:

  • Do you have a mortgage or rent to pay?
  • Are you saving to buy a home, or other big-ticket items?
  • How much debt do you have?
  • Do you have a rainy-day fund, and how long is it likely to last?
  • How much do you spend per month?
  • How much replacement income would your family need?

Some people start out by calculating the replacement income. For example, if your family's main breadwinner earns $60,000 a year after-tax, you can multiply this figure by the number of years you'd like the sum to be paid for (e.g., until your child is aged 18), and then take out coverage for that amount.

If you have a mortgage, you may choose to insure all the outstanding debt on it, and perhaps add something for your children's education.

The level of life insurance that's right for you entirely depends on your needs, goals, and budget. Need help running the numbers? Get in touch with our advisers today - they specialise in helping Kiwis from all walks of life protect their financial future.

Ready to start?

If you'd like to learn more about life insurance, please visit our dedicated page or contact our team. And of course, feel free to give our quote compare tool a spin anytime: it's quick and easy to use.

Like to explore your options even further? Though it's a good place to start, Life insurance isn't the only type of cover worth considering when having a baby. You may also look at:

  • Income Protection - It offers a replacement income if you're unable to work due to a serious illness or accident. Click here to learn more or compare quotes in minutes.
  • Health Insurance - Designed to give you faster access to treatments, diagnosis, and depending on the policy, even non-Pharmac medications. Click here to learn more or compare quotes in minutes.
  • Trauma Insurance - It provides a lump-sum upon diagnosis of 40+ serious medical conditions listed in the policy, and you can use the payout as you like. Click here to learn more or compare quotes in minutes.
  • Mortgage Protection - As the name suggests, it can help you cover your mortgage repayments should the unexpected happen. Click here to learn more or compare quotes in minutes.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.

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