What is Life Insurance?
Term life insurance rates are worth their weight in gold should you ever need to make a claim. Life insurance is a simple and inexpensive form of coverage that pays out a lump sum (the sum assured as specified in your policy) in the event of the death of the policyholder. Life insurance is similar to any other type of insurance policy. It is a contractual agreement between the insurance company and the insured person. The insured person agrees to pay the rates and the insurer in return pays out for any loss as specified in the policy. The insurance payout is tax free.
Life insurance protects you from financial loss in the event of the death of the policyholder. It is protection for your loved ones and those left behind. The payout ensures that you don’t leave behind debt or bills. Term insurance rates are charged on either a single or joint life basis. Depending on the plan, some policies pay out on the diagnosis of a terminal illness during the term of the life insurance policy.
Rates can vary as much as 50% for the same coverage. Start comparing providers now by using the quote forms found here.
Checklist For Buying Life Insurance
You have just chosen a standard life insurance policy and you are satisfied with the monthly premiums. Now you will need to gather certain information for the insurance broker or provider. Below is a list of information the life insurance company will need from you when applying for the policy.
- Personal information, such as your full name, date of birth, sex, occupation and home address.
- Whether you are a smoker or non-smoker.
- Information about your spouse and children.
- Beneficiaries of your policy in the event of your death.
- You will also be asked questions about your health and previous health insurance polices or claims.
Frequently Asked Questions About Life Insurance
Purchasing a life insurance policy is an important decision. Be sure to choose a plan that provides you with enough cover and offers affordable premiums. We have provided a list of frequently asked questions to help you decide which life insurance plan is right for your individual needs.
How much does life insurance coverage cost?
Life insurance plans differ depending on several variables: your age, gender, whether you smoke or have existing medical conditions and the amount of insurance cover you want to purchase. Other factors that can affect your plan are your occupation and lifestyle.
How do I pay for my life insurance plan?
Insurance companies usually offer various means in which to pay for your policy. Direct debit and credit card are common payment methods.
Why buy life insurance coverage?
A life insurance policy is purchased to care for loved ones after the death of the policyholder. The payout is generally intended to alleviate financial burdens such as the following:
Do I need to get mortgage life insurance coverage?
What will happen if I can’t pay my life insurance premiums?
If you stop paying your life insurance premiums, your coverage will cease. You will not be entitled to any refunds on money you have paid. It is important to budget your payments realistically before purchasing so this will not happen.
Will my life insurance premiums go up?
Your life insurance premiums and cover will increase each year with your age and indexation. Indexation is the process of keeping the amount of coverage relevant to the cost of living.
If I purchase variable life insurance, will I need to supply evidence of my health?
Types of Life Insurance
You’ve made the all-important decision to purchase a term life insurance policy but are unsure of which policy best fits your needs. In this section, we define and compare the following types of life insurance: regular term life, senior life insurance and child life insurance.
Term Life Insurance
A term life insurance policy provides life insurance coverage for a specified time period and at a specified premium, or payment amount. If the policy is specified as being a “term” policy, it expires once the insured individual reaches a certain age, whether you have child or senior life insurance. Once the individual has passed the agreed upon age and the life insurance policy has expired, no payout is required.
Permanent Life Insurance
Permanent life insurance is a life insurance policy that remains in force until the policy matures and pays out. The insurance policy cannot be cancelled for any reason, except application fraud. Permanent life insurance builds value (referred to as cash value) as the policyholder makes their premium payments. As this happens, the risk and expenses for the insurer reduce over time. There are three types of permanent life insurance policies: whole life, universal and endowment.
Whole Life Insurance
Whole life insurance provides for a level premium and a cash value table specified in the policy guaranteed by the life insurance company. The primary advantages of whole life insurance are guaranteed death benefits, cash value and fixed annual premiums. Also, mortality and expense charges will not reduce the cash value of life insurance policy. A disadvantage of whole life may be that the internal rate of return may not be competitive with other savings alternatives.
Universal Life Insurance
Universal life insurance includes a cash account. Premiums increase the cash account. Interest is paid within the policy (credited) on the account at a rate specified by the life insurance provider. This rate may have a guaranteed minimum (for fixed ULI) or no minimum (for variable ULI). Mortality charges and administrative costs are then charged against (reduce) the cash account. The surrender value of the policy is the amount remaining in the cash account, less applicable surrender charges, if any.
Endowment Life Insurance
Endowments are policies in which the cash value built up inside the life insurance policy equals the death benefit (face amount) at a certain age. The age this commences is known as the endowment age. Endowments are considerably more expensive (in terms of annual premiums) than either whole life insurance or universal life insurance because the premium paying period is shortened and the endowment date is earlier.
Accidental Death Insurance
Accidental death is a limited life insurance policy, designed to cover the insured in the event of death due to an accident. Accidental death insurance has certain stipulations and does not typically cover death resulting from health problems or suicide. Because this insurance only covers accidental death, this type of policy is much less expensive than other NZ life insurance.
It is also commonly referred to as “accidental death and dismemberment insurance,” also known as an AD&D policy. In an AD&D policy, benefits are available not only for accidental death, but also for loss of limbs or bodily functions such as sight and hearing.
Term life insurance is another very popular insurance policy here in New Zealand. Use the chat function at the top of this page to obtain a quote.