Have debt? How insurance can help

August 4, 2023

Managing debt can be a juggling act under normal circumstances. But when unexpected health issues strike, the challenge only intensifies.

That’s where having appropriate insurance can help, by helping to protect your lifestyle and future goals from the financial impact of the unexpected. Here’s how different types of personal insurance can make a difference.

Life insurance: Protecting your loved ones’ future

Life insurance is a financial umbrella designed to financially protect your family if you’re no longer around to provide. And if you're paying off significant debt like a mortgage or personal loans, life insurance could be crucial to their financial future.

The claim payment could be used to clear these debts, ensuring your loved ones aren’t left with a financial burden at an already stressful time. It can provide peace of mind, knowing that your family's financial stability is provided for.

Income protection insurance: Ensuring continuity

Imagine being unable to work for a few weeks or longer, due to an illness or injury – the debt repayments won't pause as your income does. This is where income protection insurance can play its part.

It covers a percentage of your gross pre-disability earnings (up to a maximum of 75%), starting to pay after you have been unable to work for an agreed period of time and continues for the agreed payment period or until you return to work. This replacement income stream reduces the risk of depleting your savings or getting caught in a debt spiral, and ultimately can help ensure you can continue to meet your financial obligations.

Keep in mind that usually an income protection insurance is ‘offset’ by any ACC payments you may receive in the event of an accident. In this case – depending on the amount you will receive from ACC – you may not receive income protection payments from your insurance provider.

Trauma insurance: Buffering the financial impact of critical illness

Sometimes, a severe illness or injury might not stop you from working entirely, but it could lead to significant medical costs or necessitate lifestyle adjustments. A Trauma insurance claim payment can help ease the financial burden in these circumstances.

It pays a lump-sum amount upon diagnosis of qualifying serious illnesses or injuries, as listed in your policy. And you and your family can use this payout as you like – including managing your debt repayments, covering treatment costs, or adapting to life changes.

Tailoring insurance to your needs

Every individual's financial situation, needs, and debt levels are different. That’s why it's essential to tailor your insurance policies to suit your unique circumstances. Depending on your needs, you may look at just one or two types of insurance – or take a comprehensive approach combining several different types of insurance to create a robust financial safety net.

Of course, determining the right insurance mix for you can be complex, but it's a task you don't have to tackle alone. As insurance advisers, we're here to help you create an insurance strategy that supports your financial stability and safeguards your financial future. Get in touch with us today.

The information contained in this publication is intended for general guidance and information only. It has not been personally prepared for you. Therefore, you should not act on this information if you have not considered the appropriateness of this information to your personal objectives, financial situation and needs. You should consult with us before making any investment decision. Historical market performance may not be indicative of future market performance.