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How does life insurance work?

Put simply, life insurance (or life cover) pays a lump sum if you pass away or are diagnosed with a terminal illness. It’s designed to support your loved ones with any costs that you would have contributed towards if you were still alive.

Why do I need life insurance?

If one of the income earners in your family were to pass away or become terminally ill, how would that impact the partner and family left behind? Would they be able to afford mortgage repayments, funeral costs, childcare costs etc, or would their financial future become severely affected or limited?

Life insurance is designed to protect your loved ones and is important to everyone - no matter your age or stage in life.

How can life cover help me?

There are many obvious ways that a lump sum payment will help you after the death of a partner, as well as lots of other expenses you may not have considered. Here are just a few of the things that can be covered depending on the provider and level of cover you choose:

Mortgage/debt repayment - going from two incomes to one will have a huge impact on your ability to repay debt, particularly if the main income earner is gone. Life insurance gives you peace of mind that your partner will be able to afford to continue living the life you had planned for.   

Childcare costs - if your partner was the main childcare provider in your family or if one of you needs to take time off from work to look after a terminally ill loved one, you may need extra support to cover childcare costs. This can extend to future requirements such as private school fees, tertiary education costs or anything else you had intended to provide for your child’s future.

Investment/retirement help - life insurance can support the financial future of your loved one by providing investment for ongoing income or contributing to their retirement fund.

Life insurance for single or young people

In many cases, if you are single, there may not be anyone who relies on you financially, so life insurance may not be necessary unless your circumstances change. There are however several reasons why a single person may require life cover.

Mortgage/debt repayments - if a parent, other family member or business partner has co-signed or jointly owns a property or business with you, they may be required to make the repayments in the event of your death or illness. They may be able to sell the property/business, but that takes time - so think about whether they could afford the repayments in the time it takes to sell. 

Family dependents - if you have ageing parents, grandparents, disabled siblings or non-biological children in your life, they may need your financial support in the future and this is something you can provide for them by taking out a life insurance policy.

End of life expenses - can your parents, siblings or other family afford to pay for your funeral costs if you were to pass or medical expenses such as treatment and care home expenses if you were to become terminally ill? 

Other benefits of life insurance

Depending on your provider and the level of cover you take out, there are loads of other benefits that you can work into your policy. These are just a few:

Death benefit - a lump sum payment made to your family when you pass away.

Terminal illness benefit - access your life insurance as soon as you receive a diagnosis of less than 12 months to live and this can help pay for your treatment and set up your family’s future.

Repatriation benefit - if you pass away or become terminally ill overseas, this lump sum can help to bring you back to your family in New Zealand.

Access to professional services benefits - these payments can provide your family with access to grief counsellors, financial planners, legal advisers and other professional services outlined in your policy.

Funeral costs benefit - a lump sum available after you pass to cover funeral costs.

Special event increase benefit - when a special event occurs such as buying a house, having children, or receiving a promotion, this benefit allows you to adjust your level of cover without jumping through hoops.

That’s a lot of choice right there! Where and when do I start?

We are strong believers in getting yourself set up for life as early as you can. Taking out policies when you’re young and healthy means premiums are generally lower and you can lock these in for the future. Don’t wait until you’re sick or later in life, as finding affordable premiums and the right cover can become more difficult.

Lou and Ryan are friendly and approachable and will take the time to chat through your needs and help you choose the right provider and policy. And most importantly, they will deal with the insurance companies so you don’t have to! 

Give us a call or send us a message to get started on your life insurance journey today.

This information is of a general nature only and is provided without taking full account of your objectives, financial situation or needs. Before acting on any information in this email, we recommend that you consider whether it is appropriate for your circumstances. You should not act on any advice until we have fully considered your personal circumstances and provided you with a Statement of Advice.