Saying “I do” to life insurance - how much cover do married or de facto couples need?

Finding your life partner means you’ll have someone to rely on in the good times, and the bad. As you start to build a life together, it’s often easier to get swept up in the romance and avoid any uncomfortable conversations.

Unfortunately life can be unpredictable, so it pays to be prepared for the worst, no matter how tough that conversation might feel. Investing in life insurance is an important decision for many couples — married or de facto — so in this article, we’ll discuss why securing cover for you and your partner could be a worthwhile decision for your future.

Why do married couples need life insurance?

There are numerous exciting things that come with getting married — starting a wedding Pinterest board, spending the day with your loved ones and gaining a life-long spouse are definitely causes for celebration. But, for a lot of people, married life also comes with more responsibility.

Buying your first home, having a baby or even starting a business together are exciting life moments to share with your spouse, but they can also bring significant financial responsibility. As difficult as it might be to think about, it’s important to have a plan in place to ensure you and your partner remain financially protected if an unexpected tragedy occurred.

When you take out a life insurance policy, you can name your partner as a join policy owner— giving them equal authority to make changes on your policy and ensuring they'll receive the claim payout if you were to pass away. This life insurance payout is designed to lessen the financial stress that can come with losing a loved one. The payout could be put towards covering funeral costs, bills, mortgages, loans and other everyday expenses, meaning your partner can maintain their day-to-day life as much as possible.

For some, the loss of one income might not disrupt their day to day life too significantly, but for those who rely on two incomes to cover costs, the financial burden of losing a partner would likely result in financial hardship and lifestyle changes. Sitting down with your partner to work out what life would look like with only one of your incomes is a great first step. Consider both present and future costs, such as your children’s education and your retirement.

Life insurance and children

If you and your spouse have children, it may be even harder to maintain a comfortable life on a single income. The cost of raising a child in New Zealand is thought to be around $250,000 from the age of one to eighteen - and that doesn’t account for potential future costs such as tertiary education.

Remember, life insurance doesn’t only cover death - it can also be paid out if the policyholder is diagnosed with a terminal illness. Medical expenses can be hefty, and combined with the loss of income from not being able to work, a Life Insurance payout can lessen the financial pressure on your family during an already difficult time.

Should de facto couples get life insurance?

Marriage rates have been declining in New Zealand since 2008, meaning the country has a higher than average rate of people in de facto relationships. In fact, back in 2015, 25.5% of adults aged 20 and above were in a de facto relationship — that’s over double the OECD (Organisation for Economic Co-operation and Development) average of 10%.

As per New Zealand law, your relationship is classed as a de facto relationship if you are both over the age of 18 and have lived together for more than three years as a couple. If you have a child together, your relationship is automatically considered de facto, regardless of how long you’ve been together. And in most cases, de facto partners have the same status, rights and protection as those who are married. So, with more and more Kiwi in de facto relationships, life insurance remains an important investment that will help protect you and your partner.

Don’t view marriage as a prerequisite for getting life insurance  though - your decision should be based on whether or not your partner would be financially impacted if you were no longer around.

Who needs life insurance — me or my partner?

When researching your life insurance options you’ll need to decide whether it’s better to get a policy for both partners, or just one. It’s a big decision to choose the right level of life insurance cover, though there are some simple ways to assess what will work best for you.