Part One: A Personal Introduction to Personal Insurance

Personal Insurance

16 Nov

Welcome to Crayon’s mini-series on personal insurance. Throughout this series, we’ll explore how it could work for your family and give tips from our experts to make it easy, actionable and effective.

When I was 10 years old, my energetic, vivacious mother started to feel unwell. To the shock of our family, she was soon diagnosed with cancer. And within a year, she passed away.

In our family’s most challenging chapter, we were grateful for the life insurance policy my mother had taken out years ago. At the time, it was unusual for a stay-at-home parent to take out life insurance, so in a way, she had foresight.

When I became a first-time parent three years ago, the way I thought about financial risk shifted immediately. Before kids, my husband and I had good jobs that ensured we would be ok financially if something happened to the other person. But when our daughter arrived, we felt the weight of financial responsibility.

When it comes to having adequate financial protections in the face of life-changing events, Kiwis are worryingly underprepared, generally speaking. Less than 30% of us have adequate life insurance, and less than 9% have adequate coverage for critical illness (Financial Services Council, 2020). “Adequate” in this case means that there is not only a policy but that it provides enough coverage.

Personal insurance is worth exploring if your family’s financial situation would worsen significantly if you or your partner were to pass away or suffer a serious illness or injury.

Yet, as I’ve reviewed and changed my personal insurance over the last few years, I’ve been struck by just how hard it is to navigate. So I invited Royden Shotter to share an insider’s view of the industry and to provide expertise for this series. Royden is the founder of the financial diagnostic tool Planolitix and an independent financial planner with over 20 years of industry experience.

Where possible, we’ve provided stats. At the end of the day, insurance is about mitigating risk. In turn, risk is about odds - what is the chance of an unfortunate scenario happening? Stats help me better understand what risk I’m comfortable living with and what risk I want to transfer to an insurer.

In the next part of the series, we provide a framework for thinking about risk. And by the end of this series, I hope you’ll know if personal insurance is something you want to explore further - and if so, you’ll be well-equipped to build a good safety net for you and your family.

This is part of Crayon’s mini-series on personal insurance:

Now for the important legal part: The information we provide is general and not regulated financial advice for the purposes of the Financial Markets Conduct Act 2013. Please seek independent legal, financial, tax or other advice in considering whether the content in this article is appropriate for your goals, situation or needs. The information in this article is current as at 15 November 2022.