When setting up a life insurance plan there are several points to consider. We’ll look at three of the most important to get right.
The first thing to consider is the amount of life insurance you want (the lump sum that you choose to insure). With most life insurance plans you can choose any amount you like – so the actual sum of life insurance you get is totally over to you. Most people either use an online life insurance calculator, or discuss their situation with a life insurance adviser – both can be good options for deciding the correct amount of cover for you. Either way, common considerations are debt (for example using life insurance to take care of a mortgage), providing for family members (for example a replacement income), and proving for education costs for children. Once you’ve considered each of these areas, you will have a pretty clear idea of the amount of life insurance cover that is right for you.
The next point to consider is the type of life insurance plan you’d like. One consideration will be the type of premium to choose. When you start a life insurance plan you can usually choose “stepped” or “level” premiums (the stepped premium increases with age, while the level premium does not). The level premium will cost more at first, but in the long term will save you money. So deciding the kind of premium you’d like is important, as this could save you a lot over time. You’ll also need to choose if you’d like to add extra cover to your life insurance – for example it’s very common to have part or all of your life insurance pay out if you suffer a major health issue (like cancer, stroke, etc).
Finally, you need to choose the right insurer. With life insurance you are making a long term commitment – and so you need to select a financially stable insurer that is well priced and offers you as much flexibility as possible. While life insurance plans are similar, insurers can vary a lot – so selecting the right one for you is important.
Monday, April 19, 2010
Sunday, April 11, 2010
What is a life insurance “Special Events benefit”?
Most New Zealand life insurance plans include a free feature called a “Special Events Increase”. This can be a vital part of life insurance – we’ll take a quick look at how it works.
Let’s say you have a life insurance policy that is worth $400,000. Then, because you have increased your mortgage, you want to increase your life insurance by $100,000. Usually, in this situation, you would need to provide information about your current health to the insurer (by completing a new application). The insurer would then assess this information and increase your cover. Often this is simple, however if you have experienced any health issues since you originally started your life insurance, the insurer might not allow you to make the increase (or they might allow the increase, but only at a much higher than usual premium). The reason for this is that any increase is treated by the insurer as a brand new application – which they might or might not approve.
However if your policy has a “Special Events” benefit, you can increase your cover without having to provide any health information at all to the insurer. So you’d simply make a request for the insurer to increase the insurance, and you wouldn’t have to complete an application form. And the most important part is that even if you’ve suffered a health issue, the insurer can’t deny your increase, or charge you higher than usual premiums. Even in situations where a person has become very ill, the Special Events benefit means that they are guaranteed to be able to increase their cover if a special event arises (typical special events are taking out a mortgage, having a child, moving house etc).
Special Events benefits have some limitations – there is usually a cap on the amount of the increase you can make, and people over a certain age are not eligible – however this can be an extremely useful benefit. So, if you’re thinking about starting a life insurance plan, make sure any plan you’re considering includes this.
Let’s say you have a life insurance policy that is worth $400,000. Then, because you have increased your mortgage, you want to increase your life insurance by $100,000. Usually, in this situation, you would need to provide information about your current health to the insurer (by completing a new application). The insurer would then assess this information and increase your cover. Often this is simple, however if you have experienced any health issues since you originally started your life insurance, the insurer might not allow you to make the increase (or they might allow the increase, but only at a much higher than usual premium). The reason for this is that any increase is treated by the insurer as a brand new application – which they might or might not approve.
However if your policy has a “Special Events” benefit, you can increase your cover without having to provide any health information at all to the insurer. So you’d simply make a request for the insurer to increase the insurance, and you wouldn’t have to complete an application form. And the most important part is that even if you’ve suffered a health issue, the insurer can’t deny your increase, or charge you higher than usual premiums. Even in situations where a person has become very ill, the Special Events benefit means that they are guaranteed to be able to increase their cover if a special event arises (typical special events are taking out a mortgage, having a child, moving house etc).
Special Events benefits have some limitations – there is usually a cap on the amount of the increase you can make, and people over a certain age are not eligible – however this can be an extremely useful benefit. So, if you’re thinking about starting a life insurance plan, make sure any plan you’re considering includes this.
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