The 3 Key Ways To Financially Protect Your Family
The 3 Key Ways To Financially Protect Your Family
Starting a family is one of those big life events for which the parents-to-be start furiously saving money for their new arrival and hurriedly buying cots, prams and clothes. Of course all of these are important, says Lifetime financial adviser Jonathan Lewis, but what about their insurance needs?
Many milestones in a person’s life can prompt them to think long and hard about their financial needs – first job, first home and retirement for example. Yet, arguably, starting a family adds the most disruption (of the good kind) to your family finances.
Considering the insurance needs of your child, and your own new needs as a parent, is just as important as the standard house insurance, and even the statistics reveal that a family is 49 times more likely to lose a home through loss of income than fire*. The best way to ensure your family is always financially secure is to take out the right insurances, or update your existing policies to accommodate your children.
Here are the three insurance covers you should be thinking about, and how you can tailor them, to best prepare you and your family for when the unexpected occurs.
1. Health insurance – the younger the better
The earlier you invest in health insurance, the fewer policy exclusions you, or your child, is going to have. The idea is to get the policy before anything has happened. Health insurance for a newborn is likely to cost around the equivalent of a coffee a week, and will stay the same price until they are an adult. For most health insurance providers, policy holders aren’t considered adults until 21 years of age.
If one continuous policy is maintained, the child will never have to file a medical declaration that could lead to exclusions. Children are also able to have their own policy without a parent/caregiver having to be covered – this means your child can have health insurance even if you don’t.
Good health insurance cover means that your child has access to diagnostic testing, faster treatment and a wider range of non-government funded medication.
Before the age of three months, babies are often automatically accepted onto the policy – the only details you need to apply are their name, date of birth and signature.
The earlier you invest in health insurance, the fewer policy exclusions you, or your child, is going to have.
2. Trauma cover – forget the finances to be there when you need to
Many parents would give up all work commitments in a second to spend time with a sick child as they went through treatment. Yet ongoing financial obligations can make the situation even more stressful. Trauma cover allows you and your child to focus on recovery and nothing else. If you use an adviser they will help you with the claims process, and can often have the money in the bank within a few days.
The main thing to remember is that ACC only covers accidents and not illnesses. In the event that you or a child is diagnosed with an illness, trauma cover pays a lump sum to cover debt, purchase specialised equipment, pay for home modifications or provide additional care, among other things. You decide exactly how the funds are used.
It’s worth noting that many insurance providers also add children’s trauma cover to your policy for free, or for the equivalent of a cup of coffee a month.
You can adjust your premium to make it fit your budget by changing aspects of your policy such as the pay-out sum and agreed time before claiming.
Going from two incomes to one, even for a short period of time, can demand big changes for some households.
3. Life insurance – don’t forget the stay-at-home parent
Going from two incomes to one, even for a short period of time, can demand big changes for some households. Most people prioritise life insurance for the main income earner, and severely underestimate the financial input of a stay-at-home parent.
When you consider the financial ramifications of the remaining parent having to juggle full-time work and childcare costs, the cover begins to make sense.
Life insurance is a lump-sum pay-out in the event of a person’s death. We recommend that both parents receive some sort of cover to ensure the remaining family can continue to afford the lifestyle to which they are accustomed. As a parent, the thought of leaving my family enough financial cover to sustain their lifestyle in the event of my passing is comforting.
In summary – buy what you can afford
In an ideal world, you will never have to make a claim. Unfortunately, we only ever wish we had more cover at the times when we need it most. My advice to new parents is to consider your budget, buy what you can afford and leverage the advice of people that can help you get the best and most comprehensive cover for your money.
Jonathan Lewis is a registered financial adviser with Lifetime. He lives in Christchurch with his partner Erika and nine-month-old son Huxley.
*Research by Comminsure
My last article was written about teaching your ‘young’ kids about money and that was well received by our readers so I thought I would continue down the financial education path and focus on what we need to teach our ‘young adults’ about money.
I have always found having check lists helpful so hopefully this will help those young adults heading on their OE, graduating and leaving home and possibly also for the parents or grandparents who are helping coach these young New Zealanders from the side-lines.
It’s a nightmare trying to keep track of the different website logins; passwords that seem to be ever increasingly complicated; PIN numbers and security questions that you have no idea of the answers to; (no I don’t know the name of my favourite teacher!), it is not a surprise that many think technology is making things harder, not easier.