Life insurance is an oddity. You have to die to get paid out, meaning other people receive the benefit of your insurance, not you.
So why insure your own life? It comes down to why money would be needed by other people after you die. A common reason to take out life insurance is to pay off all your debts in one hit. Otherwise your estate is left owing money that needs to be paid back, making it a burden to your loved ones who survive you.
If you have a mortgage on a house, and intend to leave it to someone, when you die, the gift is made all the sweeter by having enough life insurance cover to pay back the mortgage. If there are two of you in a partnership, both paying off the mortgage on a joint home, then you can bequeath the other person full possession of a debt-free property and an instant pay rise in not having to service the mortgage any more.
Article | Michael Coote
Michael Coote is a personal financial adviser at AMP. You can email your questions about financial matters to Michael.coote@amp.co.nz.
