Paying too much yet still underinsured is a position many households can find themselves in without realising it. In this episode, insurance adviser Callum Gilmour sits down with Rachel and Dion to walk through their insurance recommendations, explaining how the right structure can strengthen protection, reduce financial risk, and support their long-term goals.
Reviewing the Current Position
Rachel and Dion were paying $342 a fortnight for life, trauma, and medical insurance roughly $8,500 per year – without having anything to benchmark it against.
Insurance premiums are directly linked to the level of risk transferred to an insurer, meaning there is no universal “normal” cost. Every situation is different, and cover should reflect personal financial goals.
The objective of the review was clear: align their protection with their financial plan while remaining budget conscious.
Reassessing Life Insurance Needs
The plan focused on ensuring both properties’ mortgages could be repaid and that living expenses would be covered until their daughter turned 18.
After factoring in their KiwiSaver balances – which would pay out in the event of a life insurance claim – the required cover reduced to $720,000, down from more than $1 million.
This demonstrates how existing assets can reduce the amount of insurance required over time. As mortgages decrease and KiwiSaver grows, the level of risk passed to insurers can fall – and premiums may follow.
Regular reviews were emphasised as essential to keeping insurance aligned with changing financial circumstances
Structuring Cover Around Real Risks
Trauma cover was designed to provide 24 months of living expenses, allowing one or both partners to step away from work if a serious health event occurred.
By combining trauma cover with income protection, the plan avoided unnecessary duplication while still protecting against major financial disruption.
Planning for the Unexpected
Additional children’s trauma cover of $200,000, on top of an existing $50,000 benefit, was recommended so the family could focus entirely on their child without financial stress if the unexpected happened.
The conversation reinforced the value of preparing once for difficult scenarios, rather than leaving households exposed
Protecting the Household Income
Income protection was calculated by identifying the gap between earnings and expenses – the true financial risk if one partner could no longer work.
The recommendation was for payments to continue until age 65, recognising that their greatest asset is their ability to generate income.
The impression benefit is also indexed to CPI, meaning the cover increases over time to help offset inflation.
Having a detailed household budget made this advice possible, highlighting how understanding expenses is critical when structuring effective cover.
Improving Health Cover While Managing Costs
Savings were identified by removing benefits the couple were not using such as dental and introducing a $2,000 surgical excess, which they had the capacity to self-fund.
They also moved to surgery-only cover, with the ability to upgrade later without medical reassessment if specialist treatment became necessary.
Addressing a Critical Treatment Gap
Their existing policy provided only $10,000 for cancer drugs not funded publicly. Meanwhile, New Zealand funds 34 medicines compared with around 250 in Germany and the UK.
To strengthen protection, a full private medical product with a $10,000 excess was recommended to act as a backstop for major health events and provide access to leading treatments worldwide.
Emergency savings were also highlighted as a key contributor to lowering insurance costs while maintaining a personal safety net.
More Protection for a Marginal Increase
After restructuring life cover, trauma, income protection, and medical insurance, the total premium increased by just $18 a fortnight, bringing the new cost to approximately $361.
Importantly, significantly more risk had been transferred to insurers, giving the premiums a clear purpose – paying for financial security and peace of mind.
The recommendation also included moving certain policies to a provider specialising in life, disability, and health insurance, gaining additional features without losing any existing benefits.
Key takeaways
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Paying too much yet still underinsured often stems from outdated cover.
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Factoring in assets like KiwiSaver can reduce required life insurance.
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Combining trauma and income protection helps avoid overlapping premiums.
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Children’s trauma cover can remove financial pressure during family health events.
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Income protection should reflect the gap between earnings and expenses.
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Removing unused benefits and adjusting excess levels can unlock savings.
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Additional medical cover may be necessary for treatments not publicly funded.
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Regular reviews help ensure insurance evolves alongside your financial plan.
Next Steps:
If you haven’t reviewed your insurances in a while, consider reaching out to a Lighthouse Financial adviser to ensure your cover reflects your current financial position and future goals.
If you’d like to watch more, check out these other episodes below.
For a no obligation discussion to see how we can help you on the path to wealth, please contact us.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
