Red flags to consider if you've received personal insurance advice


Many insurance advisers provide terrific advice. However, this isn't always the case.

Here are two "red flags" that the advice you've received is sub-optimal. 

The adviser has recommended the same level of life insurance cover for you and your partner. 

Let's face it. It's very rare for two people in a relationship to earn the same amount. This is especially the case if you have children, and one of you has taken more time off work than the other.

It's absolutely true that even if one partner is working, the other partner is still contributing substantially to the household. In most cases, stay-at-home parents should be insured for some amount of cover in light of what their loss would mean to the household. (Another red flag is if your adviser has only recommended cover for one of you and not explained why.)  

The reality is, in most cases the death of one partner is likely to have a larger financial toll on the family than the other, and the level of recommended cover should reflect this.

Another factor is the broader family relationships of the two partners. Sometimes, one partner is from a wealthier family and would be likely to receive more financial support in the event of something happening. Sometimes one partner has extended family members who are more likely to provide other forms of support that might otherwise need to be paid for as well.

The adviser has recommended the same level of cover for your life insurance policies and your total and permanent disability (TPD) insurance policies. 

It's tempting to think that the level of cover you need if you're dead is the same as the level of cover you need if you're "living dead" (totally and permanently disabled).

But think about it: if you're totally and permanently disabled, there will be costs associated with adjusting to your "new normal". For example, changes to your home and vehicles, to accommodate to your new situation.  

There will also be ongoing costs. You might have income protection insurance, but an additional TPD lump sum may be needed to supplement this cover. 

Calculating a suitable level of life insurance cover is relatively simple. In large part, it's looking at your financial situation, and asking what position you want your loved ones to be in if you passed away.

Calculating a suitable level of TPD insurance is far more difficult - you need to consider other forms of insurance such as income protection cover, and consider different eventualities and how you want to provide for them. If done well, it is very unusual for the figures to be the same.

Fairhaven Wealth provides commission-free, product agnostic advice relating to level of cover. If you want an independent assessment of your existing or proposed level of cover, contact us.

Sonnie Bailey

Sonnie is the founder and principal of Fairhaven Wealth.

Before founding Fairhaven Wealth, Sonnie worked in the legal and financial services industries for over a decade.

Sonnie first became involved with financial advice as a specialist financial services lawyer. For many years, he was an “adviser of advisers”, reviewing thousands of advice files prepared by hundreds of financial advisers, and providing feedback in relation to the quality and appropriateness of advice; industry best practice; risk management; and regulatory compliance. He has published work in industry publications and spoken at various financial advice conferences.

Sonnie has also worked with banks, investment management firms, insurers, and derivatives providers.

Sonnie has worked as a private client lawyer, focusing on succession, estate planning and trusts. He ran his own legal firm in Australia before relocating to New Zealand. He has also acted in independent trustee and company director positions.

Sonnie is passionate about helping people achieve their goals and manage the risks to which they are exposed.

He has written extensively on his blog, New Zealand Wealth and Risk, which can be found at

Sonnie is married to his wonderful wife Chrissy, and has two young children, Ben and Anna.