Life Insurance

If you have a debt that someone else will have to inherit, should you pass away, then you should have some form of life insurance.

You should also have life insurance if you have people that are dependent on you and your income. This could be your children, older parents, siblings or any other type of dependent.

Most insurers have a ‘standard policy’ when it comes to life insurance, but, the devil is in the detail, and even these ‘standard policies’ can vary between insurance providers.

Most people aren’t ‘standard’ and their unique circumstances can effect which policy suits them best.

There are also other things to think about when you are choosing the right life insurance policy that we think are worth considering, such as:

- How will your policy 'grow with you' as you age. These are things such as the available “add ons” and how flexible your life insurer is in accepting these.

- How much your insurance premiums will increase as you age.

- How good your insurer is at paying out claims.

- How ‘healthy’ is the insurance company. (We’re talking financial strength rating here).

Life insurance is a pretty big investment, and it’s important you get it right. That’s why we recommend getting some advice around which policy is right for you.

We will assess your needs, answer any questions you have and make a recommendation as to what is right for you, and explain to you why we think that way too. This saves you loads of time and ensures you are making the right decisions, for the right reasons.

Most standard policies cover the following and can usually be customised to your specific needs.

- Funeral costs.

- Debt (including your mortgage, credit card, student loan, hire purchase debt or loans you may have from family members).

- Ongoing income for your family and/or dependents.

- Extra income to cover home expenses (for example if the homemaker had to return to work), this can include cooking, cleaning and childcare expenses.

- Inheritance you may want to leave to your dependents. This can include getting enough cover so that your kids’ education needs are paid for, or so they can have help purchasing their first home.

A standard exclusion in most life insurance policies is that insurers won’t pay out for death by suicide within the first 13 months of taking out the policy.

Insurers also won’t cover you if you have made a significant “non-disclosure” in your application for insurance. This is why it’s really important you include any information you think the insurer may be interested in when you apply for your life insurance policy.

We operate under the policy that even if you’re not sure if information is relevant, it’s best to tell the insurer up front, rather than have a nasty surprise come claim time.

The ‘policy owner’ is the person who will receive the pay out if a claim is made on your policy. This is usually your life partner, your Family Trust or someone else you can rely on to see your wishes through.

You can change your policy owner at any time, just contact us and we will organise it on your behalf.

In New Zealand, there are two basic ways you can pay for your life insurance – with ‘rate for age’ and ‘level premium’.

Under the ‘rate for age’ structure, the price of your policy (your premium) will start off low (around half the cost of a ‘level premium’ policy) but will increase as you age.

Under the ‘level premium’ structure, the price of you policy remains the same throughout the term of your insurance, but is initially more expensive (around twice the cost of a ‘rate of age’ policy).

As a general rule, ‘which one is best for you’ depends on how long you want life insurance cover for. If you expect that you will only want life cover until you are about 60 years old (because by then you will be debt free, your children will be independent, and you will have enough of a ‘nest egg’ to ensure your partner is provided for if the case of your death) then a ‘rate for age’ policy is probably best for you. This is because it will be more economical and you will probably end your life cover before the premiums increase to higher levels.

If you want life cover for a long period of time, say well into your 70s or 80s, then a level premium policy will be your best bet. You will be paying an increased amount for your insurance while you are young, but as you age, your policy premiums will not increase like the ‘rate for age’ policies do.

On our site, we offer you ‘rate for age’ policies, as these are the most cost effective policies and suit most people. However, if you are interested in a ‘level premium’ policy, please get in touch with us and we can help you out.

Under a ‘rate for age’ policy, the premium you pay (the price of your policy), will increase. This is because the insurance company is more likely to have to pay out on your policy as you get older.

An average policy will increase on an annual basis. If you have an indexed policy (a policy linked to inflation) you are likely to have a higher price jump every year than a non-indexed policy.

If you have a ‘level premium’ policy, your premium will remain the same throughout its term. However, you may have to pay slightly more each year if you want an indexed policy, to compensate for the rate of inflation.

Indexation, or an indexed policy, means that the amount insured is linked to inflation. This ensures that, if you have to be paid out, the amount you are paid will be in line with the cost of living you expected it to cover when you took the policy out.

For example, if you took out an indexed policy of $100,000 and the inflation rate was 2.5% then, upon annual renewal, your policy will be worth $102,500. This means that if your policy had to be paid out, it would effectively “buy” the same amount as a $100,000 policy would have 1 year previously.

Having your policy linked to inflation is completely optional.

We recommend that you do have an indexed life insurance policy, as especially over a long period of time, the value of your policy will erode and even though you intended your policy to provide financial security for your loved ones, it may not remain “fit for purpose”.

Underwriting is the process where the insurance provider figures out the risk of insuring you.

When it comes to life insurance it is the underwriter’s job to work out how likely you are to die before your life insurance term runs out.

This helps the insurer price your policy correctly – so your premium will reflect your ‘risk’ while still aiming to remain price competitive.

During this process, the underwriter will assess a whole lot of information, including your application, health records, driving records and family history. This gives the underwriter a full picture as to your ‘risk’.

An underwriter might make some recommendations to the insurer about you, such as recommending exclusions (or things the insurer SHOULDN’T cover you for). An insurer will either write these exclusions into your policy, or they may decide to cover you, but charge you an increased premium to compensate.

In certain circumstances we can advocate for you, to reduce your underwriting – that’s one of the benefits of having a broker.

You may have exclusions put in place on your Life Insurance policy in the underwriting process (see the question ‘what is underwriting?’ for more information on this).

An exclusion is a situation that, if it occurs, the insurer will not pay out on your policy.

The reason these exclusions are put in place is because the insurer may feel there is too much risk for them to insure you (in other words they feel the premium you’re paying will not compensate them for likelihood of you dying as a result of the situation occurring).

An example would be that if you had a strong family history of heart disease and you had a history of high blood pressure and cholesterol, an insurer might exclude heart disease in your policy. This means that if you were to die from heart disease, the insurer would not be liable to pay out on your policy.

Exclusions are put in place when you take out a policy. This is why we recommend you get Life Insurance as early as possible. Generally, the younger you then the healthier you are. As you age, your health generally declines and you may be exposed to more exclusions when applying for Life insurance.

As your life changes, your Life Insurance may need to change too, so you are still protecting your loved ones. Therefore, it is important you contact us to let us know, if for example; you purchase a new house or investment, or if you have another child. We can then recommend the changes to your policy, if any.

Your ClickCover advisor will contact you when your policy comes up for renewal (once a year) to ask you how everything is going, and if there have been any changes made over the past year.

To notify us of any changes in your circumstances, you can contact your advisor directly or email us at team@clickcover.co.nz

With ClickCover, making a claim is as easy as clicking a button.

When you need to make a claim, just contact us. We will step you through the whole process, advocate on your behalf if needed and generally make the claims process as easy as it can be.

Not a problem!

All policies in New Zealand are subject to a 14 day “free look period”. If you change your mind about getting life insurance during this time, even if you have paid your first premium, you can cancel your policy free of charge and any premiums paid will be refunded back to you.