What is Life Insurance?
Life insurance is a type of insurance policy that provides financial protection to the policyholder's loved ones or dependents in the event of their death. It is a contract between an individual and an insurance company, where the individual pays regular premiums to the insurer, and in return, the insurer promises to pay a lump sum benefit to the policyholder's beneficiaries after their death.
Life insurance policies in New Zealand typically come in two main types: term life insurance and whole life insurance. Term life insurance provides coverage for a specific period, typically 10, 20, or 30 years, and pays out a lump sum benefit to the policyholder's beneficiaries if they die during the policy term. Whole life insurance provides coverage for the policyholder's entire life and pays out a benefit to beneficiaries after the policyholder's death, regardless of when it occurs.
Life insurance policies in New Zealand may also include additional features such as critical illness cover, disability cover, or accidental death cover, depending on the policy and the insurer. It is important to carefully review the terms and conditions of any life insurance policy to ensure that it meets your needs and provides the level of protection you require.
Why have life Cover?
Unexpectedly losing a loved one can be a traumatic time for a family. Emotionally there’s a lot to process; not to mention there’s the funeral to plan and pay for, extended family and friends to contact, immediate family to console. And of course looking forward, there are the finances to consider.
It’s security that ensures your loved ones don’t get caught short, if you were no longer there to support them.
A life insurance payout can be put towards large costs such as settling a mortgage or supporting your Whanau - ensuring they can maintain their standard of living after you’re gone.
How would your family manage to continue their day to day lives if you were no longer there to support them?
If your departure would result in your family needing to sell the home or downsize, then life insurance might be a good option for you.
How insurance advisers help and what to expect
A financial adviser can help you understand what you need, and which policies are best for your circumstances. When it comes to personal insurance, one size does not fit all.
Insurance has many benefits, and an insurance adviser can help you set goals for your future and protect your family from unforeseen circumstances. For example, your insurance adviser may ask you the following:
What’s important to you?
What are your goals for the future?
What are you saving for?
What would you want to leave for your family if you were not around?
Would you want to be able to leave your family totally debt free, or would you be happy just to reduce the debt a bit?
What debt and other obligations do you have?
Who would struggle if you were not earning an income?
What might you not be able to pay for?
How could you cope if you were off work for a period?
Do you have a financial buffer to call on, or would you be in trouble?
How quickly would things get tricky? (Income protection policies can be cheaper if you can afford to deal with a longer stand-down period before payouts begin).
What are your plans for the future?
Do you expect to grow your family?
What’s your work situation? (e.g., are you self-employed – and do you need cover for your business? Or are you an employee?)
How much do you earn?
What budget do you have?
If you can’t afford all the protection types that could help you, what do you hold as most important? (Assessing your insurance priorities is a vital step. You should understand clearly your risks and what policies you choose to commit to).
Do you have any insurance in place already?
Are you happy with how that’s performing?
Have you had any claims in the past?
What health conditions do you already have?
These details must be disclosed at application time to ensure you are covered in the way you expect to be. Sometimes even symptoms can be treated as a sign of something you should have revealed.
While you may wish not to think about these scenarios, doing so is essential. Insurance could give you peace of mind and a financial buffer to call upon if the worst happens.
For example, if you’re a business owner and self-employed, a benefit of insurance is that it can help cover any claims you may need to submit in the future. Businesses present many risks, and just like a home, you want to protect your source of income. An insurance advisor can guide you everything step of the way using their expertise and ultimately save you time and money.
Getting the detail right for you
While insurance can be hard to navigate if you’re not an expert, the team at Compound Wealth are here to help. We can make things easy to understand, so you can confidently know your financial needs without worrying about whether you and your family are protected from risk. If you’re looking for insurance advice and would like to speak to a qualified Insurance Adviser about your insurance requirements, please schedule an appointment below.