This insurance is mainly to support your family and loved ones after you have passed away. The insurer will pay out an amount that you have chosen to purchase cover for, such as $500,000 toward your family members or loved ones that are included in your policy.
The money can be used for a variety of purposes including paying off debts or future commitments such as your children’s education or purchasing a first home. This ensures that your family is able to pay for daily expenses to continue their lifestyle until they are able to readjust and support themselves.
Life Insurance is important if your family depends on your income. This means that if you pass away, your loved ones will have their only source of income cut off. With this insurance, their lifestyle will be less affected while adjusting at a difficult time. Car accidents, heart attacks, cancers... 2020 has taught many of us that life is unpredictable, especially that we’re vulnerable and are not in control of many things. Life Insurance can be an important coverage to ensure your family can be independent without you, in those worst case scenarios.
First, decide how much Life Insurance you want to purchase and think about the amount of debt you have, the amount your family relies on each year and how many years you'd like to provide support for them.
For example, if you had $400,000 in debts, and your family expenses came up to $50,000 each year, and you wanted to support them for five years after you die, and you wanted to pay for your daughter’s university education ($50,000). Then you’d consider a policy with coverage for $700,000 ($400,000 + $50,000 x 5 + $50,000) in Life Insurance.
Second, pick a Life Insurance company or two, to better understand their Life Insurance product and get a quote. This is pretty easy and will only require your age, gender, smoker status and occupation.
Third, apply for your Life Insurance cover once you’ve decided on the insurance company you want to go with. Some life insurers allow direct applications while others require that you engage with a broker or an in-house adviser in order to purchase their life cover. Unless you have a personal history or family history of medical issues, the process is usually quick and easy.
Fourth, check that you have a Will in place or put the person you want to leave the money behind to as the Policy Owner. This makes it clear as to who will receive the money.
Lastly, check that your insurance cover is still right for you every 12 months or if you have any changes to your family, income or lifestyle. It can be easy to set and forget as your debts and commitments are always changing in life.
Quashed is an online platform that makes it easy for you to manage and track all your insurance in one place. You’ll be prompted at the right time to check on your insurance and it helps you keep track of how your premiums are increasing each year.
The cost of your premium is different with each provider and they don't all follow the same guidelines when it comes to calculating costs. Premiums are the on-going payments you make to continue your cover and protection. Below are some of the common factors used in the industry that will play a part in determining your premium.
Your smoking history: Your health and the risk of illnesses are important when it comes to making future claims. You will have to pay higher premiums for your Life Insurance if you have a history of smoking, particularly in the last 12 months. For many providers, the definition of smoking also includes alternatives such as hookah, marijuana, e-cigarettes amongst others.
Your health: As insurance costs are calculated based on risk, they need to understand the risk of your death depending on your current health and family’s medical history. The worse your health condition is, the more you can expect to pay for Life Insurance.
Your age: Most Life Insurance policies in New Zealand come as either a stepped or level premium policy. Stepped policies are much cheaper in the beginning, but increase in cost each year as you age, making it very expensive later on. On the other hand, level policies are more expensive at first, but increase at a much slower rate, becoming more cost-effective later on. Regardless of the policy, the older you are and the longer you hold life insurance, the greater your life insurance premium will cost.
Your gender: Statistical differences in life expectancy and health between genders affect your risk in an objective way, taking into account what is outlined in the Human Rights Act 1993, and so will affect your cost. In general, males can expect to pay more for Life Insurance than females.
Your lifestyle and hobbies: As Life Insurance costs are calculated based off the risk of your death, some providers will ask about your lifestyle and hobbies, especially if you have extreme ones. For example, people who enjoy skydiving, mountain climbing, diving, or racing could pay a higher premium. This is not always the case, but is something to be aware of.
Your specific plan and cover: The greater the coverage/agreed value that your policy insures for, and the more benefits, add-ons and risk it includes, the more you will pay.