The trick of DIY life insurance
Countdown and The Warehouse sell life insurance these days.
Neither is an insurer.
As with most of the stuff on their shelves, they are resellers of somebody else's wares.
But while you can ask for help in choosing a jam, or finding the Lego, you can't just ask the nice lady at the customer service counter to tell you how much life insurance you need.
Unless you go to an insurance adviser (a sensible move), you have to work it out yourself.
That's tricky, but not impossible.
To do so, you must consider who is dependent on you, and the position you wish to leave them in should you be snatched from them by death.
Dependents: A single man with no kids probably needs enough life insurance to pay for his funeral. Funeral insurance will cover that.
A couple without kids, but with a mortgage, might to each have life cover to clear the home. But who would criticise, if they decided to only have enough to clear half?
But, having children brings a sacred duty to protect them in the case of your death.
Debt: Possibly because banks sell so much life insurance, people think it is there to pay off the house.
A debt-free home is something a family suddenly down to one parent would find handy, but what about credit card debt? What about Q Card debt? What about the debt on the business? What about the car debt?
Lifestyle: What are the lives you want for those you leave behind?
If your husband, or wife, would have to manage without you, would you want them to have to be working full time?
How much would they need in the bank to provide the lifestyle you would want for them?
Will there be the need for more childcare, or a nanny? What about a cleaner? Or a gardener?
Even with the mortgage gone, your survivor will have need of a bit of cash each week to keep things going.
But how much? And for how long?
If the kids are 15 and 17, the length of time the extra funds will be needed for is a lot less than should they be three and five.
That's great, because the older you are the more expensive life insurance gets.
Aspirations: Were you saving to get the kids through uni student loan free? Would your other half need to retrain to earn enough to get by? How much would you need to fund these aspirations?
There are 16 question marks in this column so far.
That illustrates the point that deciding how much life cover to have is all about asking and answering the right questions.
Online insurance calculators can help hone your thinking.
The likes of the banks, Countdown and insurers have them.
They'll also get you thinking about other types of insurance out such as income protection.
Once you have decided how much you need, you have to decide what you can afford.
Some is better than none, but enough is better.
GOLDEN RULES
- For some, funeral cover is enough
- If you have children, you should have life cover
- Remember, it's not the only kind of insurance
Written by Rob Stock. First appeared on Stuff.co.nz.