What needs to change ...

8 January 2016

Think back to 10 years ago. Is everything in your life exactly the same as it was then? Chances are, probably not. While we may set out our goals with the best of intentions, often things change and not always with situations within our control. Some changes are small ones such as a change of employment or updating a vehicle, whereas others are more significant. Yet even with the major changes, many people overlook making differences to their financial affairs to reflect their new position.

So what are the triggers that you should be looking at as prompts that it may be time to review the structure of your home loan or insurance products?

Marital status- A change of marital status is one of the biggest reasons to think about making changes. Whether it is the joy of getting married or the stress of going through a break-up (or vice-versa), your personal situation changes significantly and can provide a number of reasons to look at what you currently hold in place. It may be something as simple as a name change to reflect the ownership without going through a long drawn out process further down the track, but there may also be issues relating to ownership of property or an insurance policy. We have seen cases where a separation which started amicably changed due to one parties reluctance to sign over ownership of their ex partners insurance or property. Conversely, there are cases where a new relationship has required amendments to ownership structure to reflect the newly formed partnership or the fact that there is a new person in your life who you may wish to have protected should you get injured, sick or die. On many occasions it may be that a trust has been set up for the protection of assets brought into a new relationship, and discussions with your solicitor and accountant may lead to a requirement for any of your financial arrangements to be recorded against the new Trust as owner.

Children- The birth of a child is another occasion when a full review is imperative. From the home loan point of view it is important to be aware that income may well reduce if you are going from two incomes to one as well as additional expenses that may be incurred with the needs of your little one to be considered. These reductions may be offset a little by Government benefits such as the Working for Families tax credit, but the outlay is usually higher than the I.R.D. payment. Insurance suddenly takes on a whole new importance once there are children in the picture. Whereas previously, your own death could be seen as a tragedy to your partner, it would not necessarily stop them from working and deriving an income, but the impact on a young family, when time may have to be taken out to look after your child, can be devastating. But a review of insurance cover is not just about those who already have the insurance in place, and may be a way of protecting the health of all members of your family.

Statistics NZ figures up to the end of March 2011 showed that on average 63,000 babies are born each year in New Zealand and that having a baby is the number one reason those between the ages of 18-45 take out Life Insurance. In fact it is such an important time that one of the major Insurance providers is just about to launch a product for new parents who may not otherwise have time to take out any cover. They will introduce $10,000 free life insurance for new parents (So $20,000 for a couple) to provide interim protection for you during the first year of your baby’s life without any need for medical underwriting.

Major change of personal circumstance- This could be a change of employment status from salaried to self employment where income is less regular and definitely a reason to structure your home loan with a product that can be as flexible as your income. Your insurances would also need to be looked at to make sure that your earning capabilities aren’t compromised should you be unable to work due to an illness or accident. I know of a situation where somebody who had previously owned a business, wound it up but still continued to pay for an employee insurance cover six years after the business had ceased trading. Part of their review enabled us to redistribute the funds that they had been spending on a worthless cover towards something more relevant to their needs.

So, whether it is a change of relationship, family size or situation, or even because you may not have heard from your adviser for a while, it is important to make sure that what you have set up previously is still current to your present situation. Life is constantly changing around us and a review of your home loan and insurance should be a regular event. Look for the triggers and make the changes before the years have passed.

Published In Whakatane Beacon

This post was written by

John White - who has written 90 posts

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