Once you’ve decided it’s the right time to get life insurance of some kind, you might be wondering where to start. What type of cover would be best for you? How much cover should you get? What documents are required to apply? This article will help you to understand the process and tick off some of the tasks.
The checklist below may help to inform your choices before you connect with a financial adviser, who can help put your plans into action.
How to choose life insurance.
Life insurance isn’t a one-size-fits-all kind of thing. There are many options in front of you, including type of cover, amount of cover and who receives payments from a claim. Before you talk to a financial adviser, here’s some things to get you thinking:
- Figure out what needs protecting. Do you want to protect other people, your financial independence, your ability to repay loans, future dreams, peace of mind or something else?
- List the risks you’re worried about. Are you concerned about losing income because you can’t work due to a serious illness or injury? Becoming disabled? Dying early?
- Look at your current safety net. Do you have savings or some other resource you could tap into? How long would it last?
- Think about the types of cover that could help. We recommend you work with a financial adviser to develop a financial plan that’s right for you. But first, it can help to understand some of the different types of cover:
- Life cover. Also known as life assurance, life cover pays a lump sum if you (the insured person) die or receive a terminal illness diagnosis with less than 12-months to live.
- Trauma cover. Trauma cover, aka critical illness cover, pays a lump sum if you (the insured person) are seriously injured or diagnosed with a condition that’s defined in your policy document.
- Income protection cover. Income protection cover, sometimes called income replacement insurance, pays you an income if you can’t work due to sickness or injury for an ongoing period.
- Total and permanent disability (TPD) cover. TPD cover pays a lump sum if you become totally disabled and are unable to work, ever again.
- Monthly mortgage cover. Helps to take care of your mortgage commitments if you can’t work due to sickness or injury for an ongoing period.
- Survivor’s income cover. Provides a financial safety net of an ongoing monthly income to those you leave behind after you’ve died.
How to choose the best life insurance company for you.
Google search results quickly reveal just how many life insurance possibilities there are out there. Before you pick one, here are some things to think about and look out for:
- What is their financial strength rating? This rating is a benchmark that measures an insurer’s ability to meet future financial obligations, like paying your claim. You should be able to find this rating on the insurer’s website. Financial strength rating agencies include A.M. Best, Standard & Poor’s and Fitch Ratings. The scale of which the rating forms part is available for inspection at our office or you can read about our financial strength rating.
- What is their claims payout record? You may want to choose a company with a good track record when it comes to paying claims. You may find it useful to look for claims statistics, to see what and how much is paid out. For example, Fidelity Life accepted 93% of new claims in the last financial year (1-July 2021-30-June 2022). Read about the claims we've paid.
- Where are they based and what’s their reputation like? It can be comforting to know the insurer has been around for a while and has a track record and heritage you can trust. Read why New Zealanders like you choose Fidelity Life.
- How much does it cost? There's no ‘one size fits all’ solution when it comes to life insurance – your insurance will be unique to you and your needs. Whilst price is one factor, it’s important to find life insurance that provides the best cover for you based on your individual situation. A financial adviser can develop a plan that’s personalised to your needs and show you the cost and what’s included. By working with a financial adviser, they’ll be able to show you a range of comparative costs from different insurers.
Know what kind of information and documentation you may need.
Insurance applications are detailed. They require you to answer some personal questions and provide specific information to the insurer. The information you provide is used to determine what insurance cover can be offered to you and on what terms. It’s important to provide full and genuine answers. The questions are based around things like:
- Your lifestyle.
- Occupation and activities at work.
- Medical history of you and your family.
- Smoking status.
- Hobbies and activities.
How to choose a financial adviser.
Getting help from an expert allows you to make more informed choices about the type and amount of life insurance to get.
In New Zealand, financial advisers are required to be licenced. This means they work under a valid Financial advice provider licence. If you don’t know any financial advisers, we can help you to find one.
Here are some questions you may want to ask the financial adviser you’re thinking of working with.
- Can you provide proof that you are licensed?
- Are you experienced with all types of life insurance?
- What insurers do you work with, where are they based and what are their claims payout rates?
- How do you assess my needs?
- What happens to your customers when you stop working as an adviser?
The easy way to find a licensed financial adviser.
We recommend working with a financial adviser, because developing a life insurance plan is an important process that shouldn’t be rushed through in a few minutes.
DISCLAIMER: The information contained in this article is a summary of the key points of the insurance cover(s) mentioned and is general in nature. This article does not constitute a financial advice service. All covers are subject to the definitions, standard exclusions/limitations, terms and conditions contained in the full policy documentation which is available from Fidelity Life or your financial adviser who holds a Distribution Agreement with Fidelity Life. All applications for cover are subject to underwriting criteria.