Covering your liabilities, a gift when you're gone

28 July 2017

A recent event serves as a reminder as to the importance of having a will to make life easier for your family when you die, but also brought to light how up to date insurance can provide a similar level of comfort to avoid heartache for your loved ones at an already stressful time. While Insurance payable upon death or the diagnosis of a terminal illness may not be a subject that many of us want to think about, when it is set up correctly it will cover any outstanding liabilities that may remain at the time of your passing.


We have personally seen situations where parents have died and having completed their will correctly as recommended have left a home to a child. However, the issue that wasn’t addressed was the fact that there was a mortgage against the property and the child was unable to afford the repayments on the loan attached, meaning that the property which the parent had intended to be retained as a family home had to be sold in order to repay the debt. The setting up of Life Insurance to clear the liability at time of death would have meant that this legacy could have been enjoyed by the family. In fact a discussion with an insurance adviser at the time the will was being signed may have found a solution whereby even a portion of the borrowing could have been repaid from a smaller level of insurance, leaving the beneficiary of the estate with a small affordable debt allowing them to retain the property.


But it is not just the clearing of debts that Life Insurance can be used for. Hopefully most of us have got to a stage of life where our debts are minimal before we pass away. In that case, the amount of Insurance paid out upon your death can be used to cover funeral costs and also to provide an income for those left behind so that they may not have to rush straight back to work at their time of grief. Or there may be other expenses that need to be allowed for. Statistics New Zealand figures state a sobering fact that,

 “In New Zealand, one in six men and one in nine women who reach the age of 30 will die before 65”.


 If you were amongst them what would be the important things that you would like to make provision for? If you have young children would you like to provide funds for their education, deposits for their first home? Would you prefer to set up an insurance that instead of paying a lump sum would make regular payments to your family to replace any lost income? Talking to your adviser about the things that you want to happen and have covered after your death provides a greater degree of peace of mind than just picking a dollar amount from an online calculator!


There are proven triggers that make us look at taking out life cover. Buying a house, having a baby and a change of marital status are the key times that we start to think about getting insurance, but making sure that the level and type of cover that you have in place is still relevant is just as important as the initial set-up. Whatever the amount or reason you choose, or the way you structure your finances to put your affairs in order, the important thing to remember is the reason you choose not only the actual insurance, but also the adviser who is going to take care of your family at claim time!

Published In The Whakatane Beacon

This post was written by

John White - who has written 90 posts

Comment on this post