Goal-based insurance planning

The old complaint that if you insure your home loan payment, then the party you have protected is the bank, not really you or your family, has some validity to it. That’s because the goal should be: “if I can’t work, we get to keep our home”, not the implicit “the payment on the home loan is made.”

Using a goal to describe what we want to happen – rather than complicated maths – helps to connect with clients. We still need the maths, but clients want you to do that for them. The idea runs something like this:

If you can’t work – what do you want to happen? Pause. Nervous shuffling. Eventually we agree that we would like some income to be paid. We know ACC won’t cover everything, so we look at income protection. We discover that the limit is roughly 75% (with variations, I know). We can add some trauma, we can add some TPD (sometimes it is built in, we can top it up) we want some life cover. The amounts are a question. How much depends on the goal.

A goal based approach to the amounts can be described like this: