Who Should You Insure First? Most Families Get the Order Backwards

When your family bought insurance, did you think of the children first, or the adults? In the policies I review, families who have covered the children thoroughly and left the adults with nothing are not rare at all.

The right order is life cover on the household’s main earner first, trauma cover for the adults second, and the children third. In New Zealand a health policy is usually enough for a child, with trauma cover added later once the budget allows. If your family’s cover runs the other way round, the problem is not that you bought too little. It is that you bought the wrong things.

A policy I reviewed recently

A family of four. Everybody had health insurance and each child had $300,000 of trauma cover. Neither parent had any life cover, and neither had trauma cover either.

The part that made me stop: Dad was the household’s only earner and Mum was at home full time. That structure has the risk pointing in exactly the wrong direction.

Why it is backwards

I understand the instinct completely. You look at a small child, you think about how vulnerable they are, and you want to wrap more protection around them.

But insurance is not about who is most vulnerable. It is about whose misfortune would damage the household most. A child does not carry the family’s financial obligations. The person whose illness or death would stop the mortgage being paid, cut off the living expenses and put the children’s education in doubt is the adult earning the money.

If a child gets sick, the adults can be there, take time off, absorb it. If the adult holding everything up goes down, who absorbs that?

The correct order is not complicated

1. Life cover on the main earner always comes first. Whether the cause is an accident or an illness, there needs to be a sum of money that carries the household through the hardest years — clearing the mortgage, letting the children finish school.
2. Trauma cover for the adults comes second. What genuinely breaks a family’s cash flow is an adult getting seriously ill: unable to work through treatment, income gone, and costs higher than usual at exactly the same time.
3. For children, a health policy is usually enough. It is cheap, practical and good value — tens of dollars a month covering specialists, diagnostics and surgery. Trauma cover can be added later when there is room in the budget.

If an illness that stops an adult working is what worries you most, it is worth reading how income protection and trauma cover divide that job between them.

Premiums are not cheap right now, so every dollar has to land where it counts

Premiums in New Zealand have risen sharply over the last two years (here is why), which makes the order matter more, not less, for families on a tight budget. It comes down to one idea:

Insurance is not how you express love. It is how you fill a risk gap. Protecting the adult who holds the household up is what actually protects the children.

If you are not sure whether your family’s cover is structured the right way round, send me your policies and I will review them for you, at no charge.

Want a policy review? Get in touch with Cornerstone Insurance.

Phone: +64 211 280 727 Email: amy.tao@cornerstonefs.co.nz WeChat: Amytaoingrace