A Will and an insurance policy might seem like two completely separate things. One deals with what happens to your estate. The other provides financial protection if certain events occur. But when you look at the bigger picture, they can be closely connected. Because having a plan for what happens to your assets is only part of the conversation.
It can also be important to consider where the money will come from when your family or business needs it.
Two different pieces of the same puzzle
A Will can set out your wishes for your estate and help provide clarity around how your assets are intended to be dealt with after your death, subject to the relevant legal arrangements.
Insurance can provide financial benefits when specific insured events occur, subject to the terms and conditions of the policy.
They have different purposes. But those purposes can complement each other.
Think of it this way:
Your Will helps provide direction.
Your insurance may provide financial resources.
Together, they can form part of a broader plan for protecting the people and things that matter to you.
Consider a family home
Imagine you've spent years paying off your mortgage.
Your home may be one of the largest assets you own.
Your Will may set out what you want to happen to your estate.
But what happens if you die while there is still a substantial mortgage owing?
Your family may inherit an asset, but they may also inherit the financial commitments attached to it.
Life Insurance can potentially provide a lump sum to beneficiaries following death, subject to the policy terms and conditions.
That money could potentially be used to help with financial commitments such as a mortgage or other debts.
The Will and the insurance are doing different jobs.
But considering them together can help you see the bigger picture.
It's not just about the value of your assets
Estate planning can sometimes focus heavily on what you own.
But financial planning also needs to consider what you owe and what your family may need to maintain their lives.
Imagine a family with:
A home with a mortgage
Two incomes
Children
Savings
KiwiSaver
Other investments
Life Insurance
If one income disappears because of death, the family's financial position can change significantly.
The value of the home hasn't necessarily changed.
The savings may still be there.
The investments still exist.
But the family's ability to meet ongoing expenses may be different.
This is where insurance can play a role alongside estate planning.
What about business owners?
The connection can become even more important when you own a business.
Your estate may include shares in a company.
There may be other shareholders.
There may be business debt.
You may have personally guaranteed borrowing.
Your family may depend on the value of your business interests.
Your business partners may want the ownership structure to remain with the remaining shareholders.
These issues can intersect.
A Will can be part of your estate planning.
A Shareholder Protection arrangement may help provide funding for the purchase of shares following the death of a shareholder, depending on how the arrangement has been structured.
Debt Protection may be considered where particular business debts need to be addressed following specified events.
Life Insurance may provide funds for beneficiaries.
Each arrangement has a different purpose.
The important thing is considering how the pieces fit together.
Who owns your insurance?
This is an area that can be overlooked.
Insurance isn't simply about having a policy.
The ownership of a policy and how benefits are structured can matter.
For example, personal and business insurance can have different ownership arrangements, and those arrangements can affect how the policy operates when a claim is made.
That's why it's important not to assume that having insurance automatically means everything will work exactly as expected.
The policy needs to be considered alongside your wider financial and legal arrangements.
Your circumstances can change
The plan you put in place five or ten years ago may have made sense at the time.
But life doesn't stand still.
You may have:
Bought or sold a property
Had children
Started or sold a business
Taken on new debt
Built significant savings or investments
Changed your relationship status
Added or changed insurance
Become a shareholder
Changed your financial priorities
When circumstances change, the different parts of your financial plan may no longer fit together in the way they once did.
A Will may need updating.
Your insurance may need reviewing.
Your shareholders' agreement may need attention.
Your ownership arrangements may have changed.
The important thing isn't simply reviewing each item separately.
It's checking whether the pieces still work together.
What happens if something goes wrong?
A useful way to think about this is to work backwards.
Imagine you die unexpectedly.
What happens next?
What assets are left behind?
What debts remain?
What insurance benefits might be available?
Who receives those benefits?
What happens to your business interests?
What happens to the family home?
Who is responsible for dealing with your estate?
Would your family understand what you had in place?
Now imagine a different scenario.
You become seriously ill and can't work.
What happens to your income?
What happens to the mortgage?
What happens to your business?
Would existing insurance provide any financial support?
These scenarios are very different, but both highlight the same principle:
Protection works best when the different pieces have been considered together.
You don't need to have everything figured out at once
Estate planning can feel complicated.
Insurance can feel complicated.
Business structures can feel complicated.
You don't necessarily need to solve everything in one conversation.
A good place to start is simply understanding what you already have.
What assets do you own?
What debts do you have?
What insurance policies are in place?
Who owns those policies?
Who would receive the benefits?
What business interests do you have?
What does your Will currently say?
Are there other agreements or structures that need to be considered?
Once you understand the pieces, you can start looking at whether they work together.
Your solicitor can provide advice on your Will and legal arrangements. Your accountant can help with appropriate financial and business considerations. Your financial adviser can help you understand how insurance fits into the wider picture.
Each professional has a different role.
Protecting what you've built
Over the course of this campaign, we've looked at the many things people spend years building.
Income.
A home.
A family.
A business.
Savings.
Investments.
Relationships.
Financial security.
But protecting those things isn't necessarily about one policy or one document.
It's about understanding how the different parts of your financial life connect.
Your Will can help provide direction.
Your insurance may provide financial resources when specific events occur.
Your business agreements can help establish what happens to ownership.
Your savings and assets can provide additional resources.
Together, these pieces can form part of a broader plan.
Because protecting what you've built isn't just about having the right pieces.
It's about making sure the pieces work together.
If you have a Will, insurance and business or investment interests, it may be worth reviewing how these arrangements fit together, particularly if your circumstances have changed. At New Vision Financial Services, we can help you understand how your insurance fits into the wider financial picture and work alongside your solicitor and accountant where appropriate.
Amy Callon
Financial Adviser
New Vision Financial Services
Plan your future and let us help you have peace of mind along the way.