Life insurance for single income families.

Many New Zealand families are supported by just one income earner. In some cases, a parent has elected to stay at home and do domestic duties while children are small. In other circumstances, children are being raised in one-parent households. There are also plenty of families with no children or none at home, and just one person bringing in the income.

For families with one income earner, the risks of income interruption or loss are magnified. A prolonged illness or period of recovery from an injury could mean family finances come under pressure. And if the worst was to happen and the income earner dies, this could amplify financial worry.

Carefully chosen life insurance can become a safety net for single-income families who recognise the need to have some financial protection if the worst was to happen. Because there are several types of life insurance, understanding how each of them can contribute to a family’s financial security is helpful.

If you’re the sole income earner for your family, this article helps to show some of the risks that could impact family income, and the types of life insurance available that may help.

What if you get sick or are injured and need extended time off work?

New Zealanders are entitled to 10 days sick leave a year, depending on how long they’ve worked for their employer*. In some cases, your employment contract may include more than 10 days sick leave.

When sick leave runs out, but you’re still at home recovering from an illness, your family may have to use savings or credit to get by. If you’ve been injured you might get some compensation from ACC, but it may not be enough to cover all the family’s expenses.

If you’d rather not dip into savings or use credit for living expenses, you could look at getting income protection cover. It’s a type of life insurance that pays a monthly benefit if you are disabled or suffer an extended illness. Fidelity Life Income protection cover pays up to 75% of your before-tax annual income as a monthly benefit, up to a maximum of $30,000 a month.

Ready to find out more? Get in touch.

What if you get a serious illness?

New Zealand is considered to have a robust social welfare system. Work and Income may be able help with a supported living payment if you’re diagnosed with a serious health condition that will prevent you from working, however you need to meet strict eligibility criteria. If you do qualify, the payments may not be enough to cover your family’s usual living expenses. You can visit the WINZ website for more information.

Because serious illness can really upset family finances, you could consider getting a form of life insurance called trauma cover. It’s a type of protection that pays a lump sum if you’re diagnosed with a serious illness and meet the specified definition that’s covered in your policy. Fidelity Life Trauma cover applies to more than 40 serious health conditions and circumstances. See the full list of conditions.

The money you get from a trauma cover claim is ultimately there to help ease any financial strain and allow you to focus on getting better. For example, you could use the money to:

pay rehabilitation and medical expenses not covered by the public health system.
repay a mortgage or other loans.
pay for house modifications to improve accessibility.
put money in a savings account.
use the money you receive to replace income for an extended period.

What if you die or are diagnosed with a terminal illness?

It’s a bit ‘glass half empty’ to dwell on what would happen to your family if you died or had a terminal diagnosis, however a financial safety net works better if you consider the worst-case scenario. That could mean looking at life cover, which pays out if the insured person dies or receives a terminal diagnosis with less than 12 months to live. Here are four ways Life cover from Fidelity Life could help you and your family:

Life cover claims pay a lump sum if you die, which can be used to support your family’s financial wellbeing in the future.
Our policies may allow an advanced payment of up to $15,000 to cover funeral costs.
If you’re diagnosed with a specified terminal illness or condition, you can apply to receive 30% of your life cover lump sum up to a maximum of $250,000.
If you’re terminally ill and likely to die within 12 months, you can apply for early payment of the entire lump sum.

What if you become disabled and are unable to work again?

Total and permanent disability (TPD) cover is designed to pay a lump sum if you become totally and permanently disabled and are unable to work, in accordance with the terms of your policy. It includes all kinds of work - paid work, work at home, and study.

The payout from a TPD claim could be used pay off a home loan, pay for modifications to your home to improve accessibility, create a savings nest egg, or pay for medical care and therapy that isn’t funded by the public health system.

How do you put a financial safety net in place?

For financial advice that identifies the types of life insurance cover that could be right for you, we recommend you contact a financial adviser.

DISCLAIMER: The information contained in this article is a summary of the key points of the insurance cover(s) mentioned and is general in nature. This article does not constitute a financial advice service. All covers are subject to the definitions, standard exclusions/limitations, terms and conditions contained in the full policy documentation which is available from Fidelity Life or your financial adviser who holds a Distribution Agreement with Fidelity Life. All applications for cover are subject to underwriting criteria.

*employment.govt.nz – ‘Sick leave entitlements’ 2021