If you have recently become a grandparent, you’ll be familiar with how wonderful it is to see your children begin a family of their own. The pitter patter of little feet brings a renewed sense of ‘completeness’ and contentment similar, yet different to the feeling of having a child of your own.

Often when people start a family, it can also be a good time for them to consider getting [or reviewing their current] life insurance.  But with the cost of living on the rise, insurance can often end up taking a back seat. A recent study commissioned by the Financial Services Council NZ (FSC) into how we insure ourselves shows that a shocking proportion of Kiwis - around 71% of us - have inadequate levels of life insurance.

With that in mind, as a grandparent, one option might be offering to contribute to the cost of a life insurance policy for your child. So, if anything happens to them, their new family will be protected. It would also give them some peace of mind as they navigate becoming a new parent, knowing that the family would be covered if anything was to happen to them.

To help, we’ve listed some things to consider when looking at life insurance for new parents.

 

 What are some reasons for families to consider life insurance?

Life insurance can help a family stay afloat financially and help ensure the tamariki are taken care of if one parent is no longer there to support them. It will pay a lump sum to the family or estate, which can ease the burden of paying expenses such as rent or mortgage, living costs and childcare.

For many parents, having a plan for how their young children will be taken care of if they pass away can provide a lot of peace of mind. A financial adviser will be able to talk to them about how life insurance can be used to ensure their children are taken care of if they were no longer around.

Some of the things a financial adviser might discuss with them is what expenses they currently have and whether their whanau would be able to cover these expenses on their own if they weren’t around. Or vice versa.

 What sort of life insurance cover might they need?

There is no one size fits all approach to choosing or structuring life insurance cover.

A financial adviser will help them balance cost, amount of cover and how to structure it in the most effective way for their unique situation.

Some of the things to consider is how much debt they have, what bills and living expenses they would leave behind, how would they want their children cared for and educated.

 Which parent should get life insurance?

Often new parents will be reduced to one income if one parent chooses to stay home and care for the new addition to the family. If they are in a situation where the family is financially dependent on the income of a sole working parent, it may make sense to insure the working parent.

But it’s also important to consider how losing a caregiver would impact the family. Would someone else need or want to stop working to take care of the children? Would they have family support, or would they need to pay for childcare?

It’s worth going through different scenarios to understand how much insurance they might need to cover the contributions of each parent or caregiver.

It’s always a good idea for them to talk to a financial adviser if they are considering taking out or changing their life insurance. An adviser will be able to talk them through their options and help them decide the right level of cover.

 

The information in this article has been compiled from various sources and is intended to be factual information only. Full details of policy terms and conditions are available from AA Life Insurance or your financial adviser. For advice on product suitability, please contact your financial adviser. While we take reasonable steps to ensure that the information contained in this article is accurate and up-to-date, it is subject to change without notice. NZAA and its related companies does/do not accept any responsibility or liability in connection with your use of or reliance on this article.

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