Becoming a parent transforms your insurance priorities. Suddenly, others depend entirely on you for their wellbeing and financial security. The right insurance ensures your children are protected even if the worst happens. Understanding what new parents need helps you build appropriate coverage.
Having children is one of the most important triggers for insurance review.
Government Support for New Parents
Before reviewing your insurance, understand what government support exists. Paid Parental Leave provides up to 26 weeks of payments (currently up to $754.87 per week before tax) for the primary carer. ACC covers accidents at 80% of income for all New Zealanders. However, neither covers illness-related inability to work or death from illness. Your insurance needs to fill these gaps, particularly as your family responsibilities increase.
Why Insurance Matters More
Before children, if something happened to you, the impact was primarily on yourself and perhaps a partner. After children, your death or disability affects small people who cannot support themselves.
Children create decades of financial obligation. They need food, housing, education, and care for many years. Your insurance needs to account for these extended obligations.
The stakes are simply higher when you are responsible for raising children.
Life Insurance Priority
Life insurance becomes essential when you have children. If you die, your family loses your income and support. Life insurance provides the funds to replace what you would have provided.
Calculate how many years of expenses your family would need. Include childcare, education, mortgage payments, and living costs. This gives you a baseline for cover amounts.
Both parents may need cover, even if one does not earn income. The non-earning parent provides childcare that would cost significantly to replace.
Income Protection For Parents
If you cannot work due to illness or injury, your family still needs income. Income protection replaces your earnings while you recover.
With children depending on you, the consequences of lost income are more severe. You cannot simply tighten your belt; children have needs that must be met.
Consider a longer benefit period to age 65. If you become permanently unable to work, your children need support until they are adults.
Cover For Stay-At-Home Parents
A parent who does not earn income still provides enormous value. Childcare, household management, and domestic support would cost tens of thousands annually to replace.
Life insurance for stay-at-home parents provides funds to hire help if they die. Consider what childcare, housekeeping, and other support would cost.
Income protection does not apply without income to protect, but trauma cover provides a lump sum if a stay-at-home parent becomes seriously ill.
Timing Your Insurance
Take out or increase insurance as soon as possible after deciding to have children. Pregnancy can complicate applications, and health issues during pregnancy may affect insurability.
The earlier you act, the more likely you are to secure cover at standard rates without exclusions.
If you already have children and inadequate insurance, address it now. Each day without proper cover is a risk.
What Cover Amounts
Life insurance should cover your mortgage plus several years of family expenses and education costs. For young children, this can mean significant sums.
Income protection should cover the majority of your income for as long as possible. Choose a benefit period to age 65 if affordable.
Trauma cover provides flexibility for whatever needs arise during serious illness. Consider an amount that would allow meaningful time off work to recover.
Balancing Budget And Protection
Ideal cover may exceed what you can afford. Prioritise based on what would cause the most harm.
Life insurance is usually the highest priority because death is final and your family cannot manage without significant funds.
Income protection addresses the more likely scenario of illness or disability. This is important but can be partially managed with savings and reduced expenses.
Reviewing As Children Grow
Your insurance needs decrease as children age. Once they are independent, you need less family protection.
Review cover when children leave school, complete education, and become financially independent. You may be able to reduce cover and premiums.
Do not assume needs stay static. Regular reviews ensure cover matches your family stage.
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