What personal insurances do you really need?
Have you looked for insurance but got overwhelmed with options? Or maybe you have a policy but don’t really know what it covers. We speak to clients all the time who know they have some insurance that covers life and “some other stuff”, but don’t really know what the other stuff is. We’re hoping this article will clear up what each insurance is, what they do, and if you need them.
How much should it cost?
How much your insurance could cost depends on what personal insurances you are going to have, as well as how much you can afford and how much you need. The best policy is one you can afford, however. Policies can be anywhere from a $5/week life insurance policy for someone healthy in their 20s, up to over $300/week for someone close to retirement with a full suite of insurances. At Voyager we usually like to keep a weeks premiums to what you would earn in an hour of work, or a couple of hours if you include health insurance. If you are paying more than that at the moment, reach out to see where we can cut down on your premiums.
Note, none of the below is specific financial advice. All information below is general in nature. If you want specific advice, contact us.
Life Insurance
What does it do?
Life insurance is the one most people know about, and what we are usually searching for when we want some personal insurance. Life insurance provides a lump sum payment to your family or dependents if you pass away (or in most cases, have less than 12 months to live).
What can it cover:
Funeral expenses
Mortgage or debt repayment
Ongoing living costs for dependents
Future expenses like children’s education
Do you need it?
Not everyone needs life insurance. If your have no mortgage or significant debts, you have no children, or generally nobody will be financially burdened by your passing, you may not need life insurance. We generally only recommend life insurance to those with:
A partner or children
A mortgage or significant debt
Anyone financially dependent on them
How much should you have?
Everyone has different budgets, different requirements, and different health conditions which all impact how much cover they can or should have. We ideally want all debts to be covered as well as an amount for a funeral, typically $10-20,000.
Why it matters:
Life insurance is a selfless product, and regardless of if you claim on it or not, you will never see the claim happen. Despite this, if you pass, debts don’t disappear, and dependents may have to pay for your funeral costs, or be forced to pay for your lifestyle.
Trauma Insurance
What does it do?
Trauma insurance is less known but often just as, if not more important than life insurance. It is similar to life insurance in that it pays out in a lump sum, however Trauma pays out while you are alive should you be diagnosed with 1 of about 50 conditions.
What can it cover:
Cancer
Heart Attack
Stroke
About 40-50 other conditions depending on the provider
Do you need it?
Not everyone needs trauma insurance, and it’s a little more expensive per dollar than life insurance. Trauma insurance allows you or a partner to take time off to look after you or any dependents, pay for specialised treatment, fly overseas for treatment, fly family to visit, make accommodations to your home or vehicle, or otherwise assist in your recovery. Trauma insurance is becoming increasingly needed as modern advancements in medicine assist people in surviving life threatening conditions.
How much should you have?
We usually recommend at least a years worth of salary as the lump-sum trauma payout, but anything is better than nothing. If you can afford more, 2-3 years of trauma cover would allow for more time to recover.
Why it matters
A lot of people are surviving what used to be terminal illness, meaning they continue living but are out of pocket due to medical treatment and time off work, and the fact that if they had passed they would’ve received a life insurance payout. We often see people relying on things like GiveALittle or similar sites when a trauma insurance policy would have covered them.
Income Protection Insurance
What does it do?
Income protection replaces a portion of your income if you are unable to work due to illness or injury.
What can it cover:
Injury (ACC only covers accidental injury, not injury sustained from repeated use)
Illness (unlike ACC)
Disability (ACC only covers disability from accidental injury)
Do you need it?
Income protection is often highly needed, but quite expensive. This is a form of insurance that people often leave off as they don’t see it as something that is likely to happen, but if you think of how many people you know who have claimed on ACC which is a public form of income protection, the number is higher than most people think. Despite this it’s often the first on the list to be excluded, especially as trauma insurance and ACC can make up a lot of what income protection can do. This strategy does still leave some holes, however, and if you can afford income protection it is recommended in most cases. We recommend income protection if:
You are a sole income person/family
Your income is required for you or your family
How much should you have?
There are a few types of income protection that interact differently with ACC payments, but generally we recommend 66% of your income is covered. Income protection has a cap which changes depending on the cover, but we usually recommend the maximum amount of income protection you are able to get.
Key features:
Waiting period (e.g. 4–13 weeks before payments start)
Benefit period (how long payments last—e.g. 2 years or until age 65)
Why it matters:
Although ACC covers accidents, it does not cover illness-related income loss, making this one of the most important types of cover for working individuals.
Total and Permanent Disability (TPD) Insurance
What does it do?
Total and permanent disablement insurance provides a lump sum payment if you become permanently unable to work due to illness or injury. The requirements are very specific for TPD, so it is hard to claim on, though it does support your living if you are unable to work again. TPD is designed for severe, permanent situations, not temporary conditions.
Types of TPD:
Own occupation: You can’t return to your specific job
Any occupation: You can’t work in any suitable job
Do you need it?
Due to the difficulty in claiming (usually unable to complete a certain amount of basic tasks), and the individual nature of peoples jobs, we don’t recommend TPD to everyone as it’s just not cost effective. If you work in a specialised field, are self-employed, or you would otherwise find it hard to replace your employment, you should consider TPD.
How much should you have?
Cover is often linked with other forms of insurance (trauma, income protection), though we usually recommend you are insured for enough to cover your lifestyle.
Why it matters:
If you are reliant on your job, and you would find your job hard to replace or would not be able to work another job if you were disabled, you may struggle for an income and not be able to live entirely off disability benefits. TPD would provide payment in these instances.
Health Insurance
What does it do?
Health insurance helps cover the cost of private medical care, giving you faster access to treatment and more choice. Depending on your policy, it covers up to a certain amount per year of tests or treatments, with you only needing to pay the excess that you choose when you put the policy in place
What can it cover:
Specialist consultations
Diagnostic tests
Elective surgeries
Non-pharmac drugs (drugs that haven’t yet been approved by the government)
Do you need it?
Though not always perfect, we do have a public health system in New Zealand where you can get treatment free or subsidised. We usually recommend health insurance if you can afford it, as well as if you want to avoid long public wait times, access private hospitals and specialists, have greater control over treatment timing, or want access to treatments that aren’t subsidised by the government.
Why it matters:
New Zealand’s public system provides essential care, but health insurance offers speed and flexibility for non-urgent treatments. We have often heard stories of people waiting months for critical cancer treatments that could be the difference between a simple removal, or a terminal illness. Health insurance can help speed up treatment to avoid this.