Whether you already have life insurance in place, or you’re looking at your options for the first time, there might be things that you don’t know about life cover.
Here are some things to consider, to help you structure your cover in a way that’s most appropriate for you, now and in the future.
You can choose your premiums
Would you rather pay lower premiums for now, knowing that they will increase as you age? Or pay higher comparative premiums now, knowing that the amount will remain the same every year and eventually be lower than stepped premiums for the same level of cover?
As you may know, with personal insurance, premiums usually start low and increase with age. These are called ‘stepped’ (or age-related) premiums. But there’s an alternative option, and that’s level premiums: compared to their stepped counterparts, level premiums start significantly higher but remain the same through the duration of the contract (unless you change your level of cover, of course).
Level premiums can be a good choice for people in their 30s or 40s who plan to keep the same level of life cover for a long time, and want to secure long-term affordability. On the other hand, stepped premiums are more affordable in the short term, and they may be appropriate for people who expect their insurance needs to reduce (for example, because they will be paying down their mortgage, or their children will become independent at some point).
Not sure what might be for you? We’re here to answer your questions and help you understand your needs.
‘Bundle’ it for different needs
Like to have different types of cover for added protection? We all have different needs and goals, and depending on yours, you might want to protect your future from multiple angles.
Some insurance providers allow you to get life insurance and other types of cover together (e.g., trauma insurance), under just one policy. For example, you can take out accelerated trauma insurance as an add-on to your life insurance policy. This type of cover is designed to provide a lump-sum amount upon diagnosis of one of the serious medical conditions listed in the policy.
‘Accelerated benefit’ means that, in the event of a trauma claim, the amount will reduce the life insurance amount. Suppose you have a $500,000 life benefit, with $100,000 accelerated trauma. If you claimed on your trauma cover, your life benefit would reduce by $100,000 to $400,000 (with the opportunity to buy back the original amount after a certain period of time).
Payouts – what you see is what you get
Did you know that, in New Zealand, life insurance payouts are mostly tax-free?
Although no one likes to think of a time when you might have to claim on a life cover, if the situation ever happens, it may be a source of comfort to know that your family will likely receive the complete payout amount that you chose in your policy.
Most life insurance claims are also GST-free. This means that you can calculate the level of cover you need, and at claim time, your family receives the full amount.
Thinking of replacing existing life cover?
Already have life cover, and maybe you’re considering switching your existing policy with a different one?
If so, it’s important to know that applying for a new life insurance policy always entails new ‘underwriting’ – no matter if it’s your first-ever life policy, or your next one. This means you will be asked about any medical conditions that you might have, or have had in the past. The insurer will then use that information to decide what exclusions and conditions to add to your policy.
In other words, if you have developed a medical condition after you took out life insurance, that would likely be covered under your current policy – but it could be excluded under a new one. So, if you already have life cover, and replace it, you may lose the important level of protection you currently have.
Are you considering switching policies? Before you do, please get in touch. We can help you understand how that may affect your protection.
Like some advice?
As straightforward as life cover may seem on the surface, figuring out how much you may need can be confusing on your own. It involves a range of decisions and technicalities that you may or may not understand well.
As insurance advisers, we’re here to help you protect your loved ones, and yourself, with life insurance tailored to your needs.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.