Things to consider.

• Why does my life insurance increase each year?

  When you take out your life insurance, you’re given a choice about how you want to pay. If the cost of your cover generally increases each year, your cover is likely age-rated. This means that at your annual renewal, you’ll tend to see an increase in the premiums you pay for the next year ahead. Age-rated cover takes into consideration that as we age, we increase our risk of getting sick, becoming disabled or dying. Read more about the medical data and statistics that underpin this.

• How are prices determined?

  To set annual premiums, we look at a range of data – population, insurance industry and our own data – to determine the likelihood of claims. This statistical analysis guides decisions about life insurance price increases.

  Your price change is made of 3-main factors:

  1. Age-rated – every year as we age, we generally pose more risk as our likelihood of making a claim increases.
  2. Consumer Price Index or CPI – this is an option that many people choose to include in their policy. The plus side is the amount you’re covered for goes up to help protect against the effects of inflation, but this is something that is paid for as part of your increase.
  3. The base price of the cover – one of the things we need to balance is to ensure the money we receive from premiums, are enough to ensure claims can be paid to customers. This means the base price of the cover can change, to ensure that customers are covered for the long term.
• Has your mortgage reduced?

  The amount you’re insured for is one of many factors that determine how much you pay for your life insurance. If you chose to take out an amount of money that covers your mortgage it may be worth checking if this still lines up with the value of your mortgage. Reducing the amount you’re covered for is one way to reduce how much you pay.

• Any significant health changes in your lifestyle or smoking habits?

  Your health and lifestyle are key factors used to determine the amount you pay. Have you stopped smoking or had an improvement in an underlying health condition? Let us know if you have, this may reduce the amount you pay.

• Are your wait & payment benefit periods set right for you?

  For some types of life insurance, you choose a claim wait period when you take out the cover. A waiting period is how long you’ll wait to receive payments once you have met the claim definition. When you take out the cover, you also decide how long you want benefit payments to continue for once your claim is accepted. This is called the benefit payment period.

  Both the waiting period and duration of payments affect how much you pay. A longer wait period and a shorter benefit payment period cost less, but this could also leave you short on income if a sickness or injury carries on. As always – this is something you should talk to your financial adviser about, to see what’s best for you.

• What does inflation have to do with my life insurance cost?

  The Consumer Price Index (CPI) is a measure of inflation, that indicates increases in the cost of living for New Zealand households.

  The most recent measurement (December 2022) indicates an annual inflation rate of 7.2%.

  To help the value of what you’re insured for keep up with cost of living, many New Zealanders choose an additional option, when they take out their cover, known as a CPI benefit or inflation protection. This means, each year your sum insured increases, and this cost is added to your annual premium increase.

• How do I remove a cover type?

  Removing a cover type is of course another option, though there are pros and cons in doing so. Before you make any changes, speak to your financial adviser as they can provide you the benefits and risks, this option pose. Whilst it can sound attractive to save money today, you should consider where this leaves you in the future. 

• When else should I review my insurance?

  When life changes, so should you cover. Here’s a list of a few other reasons that should prompt you to review your cover.

  • Starting a new job or a having a change in your employment status.
  • Moving in with a partner.
  • Getting married.
  • Separating from your partner or getting divorced.
  • Buying a new home or investment property.
  • Becoming a parent, guardian or caregiver.
  • Your kids are no longer financially dependent on you.
  • Going into business for yourself.