Helping our clients with life insurance is a key part of what we do here at Plus4. It’s an important topic, so we’ve answered some of the most common questions people ask us.
What sets life insurance apart from other insurance policies is that it is generally not for you.
Life insurance is almost always for someone else, so the question is best answered by looking at your circumstances and the people you care about. If there would be a financial shortfall created by your untimely departure, then yes, you definitely need life insurance. On the other hand, if you have a freehold home and no dependents, then your need for cover may be minimal, if at all.
Again, we need to go back to remembering that it isn’t about you. So, it is better to frame this question as how much life insurance do they need. An exercise we take clients through is to think about the value of your income to your family over the next 20 years. That could be the loss to your family if you are not around.
This is a complex question, with so many variables, and answering it is one of the times where the value of using an adviser shows. Having someone who will sit down and get to know you (and get a grasp on your life stage, your budget and your values) makes a world of difference in deciding how much life insurance you should have.
Key factors to consider include covering any debt, replacing ongoing income, covering a mortgage and what kind of lifestyle you want your loved ones to lead. If you have dependants you will also need to think about how to provide for the people that will be providing for your children, and how you will structure a pay-out should both you and your partner be gone.
Most policies are set up to be jointly owned, by both the insured party and the intended recipient. This makes everything smoother at claim time. It also means that it is important to update policies should there be a change in your relationship status.
If the situation arose where both policy owners were deceased, the insurance pay-out would become a part of the estate, or go into a trust if one was set up. Read more about setting up a will here.
There is a Terminal Illness Advance in most life insurance policies, which means if you have a terminal illness and are likely to die in 12 months you can receive your full insurance pay-out ahead of time.
One of the huge advantages of having an adviser is that we are always available. You can call us if something happens and we can help you through the process, every step of the way.
Upon receiving notification that a policy holder has died, most insurance providers will immediately release $10,000 to $15,000. On receipt of a death certificate, the remainder of the pay-out is released, which can take a few days.
Check your life insurance policy regularly
It is important to remember that life insurance shouldn’t be static, it should match where you are right now. This means as your family or your assets grow, you may need to increase your sum insured. Then, as your children become independent and the mortgage goes down, so should your sum insured.
This is one of the big differences between and insurance salesperson and an advisor – a salesperson wants to sell you insurance; while an advisor is in it for the long haul. An advisor will make sure you have an appropriate amount of coverage at each stage of your life.
Read more about when to update your policies here.
Life insurance could make a big difference to the ones you leave behind
On a final note, we can all agree that no one likes paying premiums, but everyone is grateful for insurance when they need it. We have never heard anyone say they had too much insurance at claim time.
If you want to get life insurance set up, or review your insurance policy to make sure your sum insured isn’t too high or too low, get in touch with one of our advisers.
Here are a few reviews from some of our existing clients around New Zealand