It’s not something most people wake up in the morning and decide to get sorted, but life insurance is important to have in place, particularly if you have dependents. At a minimum, life insurance should cover your debts, funeral expenses, and any living costs your family might need. If you’re thinking about getting your life insurance sorted, here are a few things you need to know.
There are two common types
The two most common types of life insurance are term life and whole-of-life insurance. With term life insurance, you’re paid out the agreed amount if you’re diagnosed with a terminal illness or pass away within the period of time set out in your policy, i.e. 20 years. Whole-of-life insurance is what the name suggests, your cover lasts for life as long as you continue to pay the premiums – this is often more expensive than term life policies though.
There are different premium options
Typically the cost of your insurance premiums goes up as you get older, but there are different ways that you can structure it so it works best for you. Stepped premiums start out at a lower cost, and then increase each year, whereas level premiums start out at a higher cost but stay at that cost each year. It’s best to sit down with an adviser if you’re unsure which option is best for you.
Your children might be able to be covered too
Quite a few life insurance policies have the option for you to include your children under your policy. It’s often at no additional cost to you, and it means that if your child is diagnosed with a condition that’s covered under your policy, you’ll receive a payout to help you look after them. Not all insurers offer this as an option but it’s worth checking out – have a chat to your adviser to see whether you’re eligible if it’s something you’d like to look into.
Payouts are usually tax-free
In New Zealand, most life insurance payouts are tax-free. The exception here is any payout you receive under an income protection policy as this is considered income and is tax deductible. You usually also won’t pay any GST on life insurance premiums, but again, if you have additional benefits like income protection, that would be the exception.
If you’d like to review your current life insurance or look at your options for putting some in place, get in touch with our team today.