Life insurance is a contract between you and an insurer that’s designed to protect the financial wellbeing of your partner and/or family. It does this by paying money, either as a lump sum or as a monthly payment, when a claim is approved.
What types of life insurance are there?
There are several types of life insurance. All of them aim to protect you and your family’s financial future from things that might happen one day.
- Life cover pays out a lump sum when you die or if you’re diagnosed with a terminal illness and have less than 12 months to live.
- Income protection is a type of cover that pays a percentage of your monthly income if you’re injured or have a sickness that leaves you unable to work.
- Mortgage protection is designed to cover your home loan payments, rent or other expenses if you are unable to work due to sickness or injury.
- Trauma cover pays a lump sum if you’re diagnosed with a health condition that is defined in your policy wording, like a stroke, heart attack or specific type of cancer.
Why do people get life insurance?
Just as you choose to protect your house, car and belongings with specific types of insurance, you can choose to protect your life. When you think about it, your ability to earn money and support your family is a huge asset. It’s logical to protect that asset with the right kind of insurance.
The main benefit of life insurance is that you don’t have to worry about what could happen to your family’s financial circumstances if you weren’t around anymore, or if illness or injury prevented you from earning. Nobody likes to think about this kind of stuff, but having a plan in place can be reassuring.
How is a life insurance claim payout helpful?
Think of all the things your income currently supports. You might be repaying a mortgage, paying rent, or making payments on a car or other major purchase. You might also be covering school fees, after-school activity fees (dance lessons, sports coaching, music lessons) and other kid-related costs. Or it could be that you’re saving up for a specific goal, like your children’s university education or a family holiday.
You or your family can decide how best to use the money received from a life insurance claim payment.
What can a Life cover insurance lump sum be used for?
Life cover is designed to protect the future financial wellbeing of your partner or family if you become terminally ill (with less than 12-months to live) or when you die. It does this by paying a lump sum of money. The size of the lump sum payment is chosen by you when you take out life cover; it’s sometimes called the ‘sum assured’. It’s worth noting that the amount of cover you apply for is subject to medical and financial assessment.
Advanced payment to help cover funeral cost.
If you have Life cover with Fidelity Life and you were to pass away, your family (or a person nominated to receive funds) could get an advanced payment of up to $15,000. This money can help with immediate costs, such as organising a funeral. This amount is taken from the total sum you are insured for.
When the rest of the lump sum is paid out, your family gets to decide what to do with it. They might choose to pay off a mortgage, car or any other debts, pay for daily living costs, put it in a savings account, or put it towards a new house.
Early payment for terminal illness.
If you’re diagnosed with a terminal illness and have been given less than a year to live or a significant reduction in life expectancy, you may receive an early payment from the sum you’re insured for. The money can be used for whatever you and your family decide.
What does life insurance cost in NZ?
The cost of life insurance depends on the sort of cover you decide to get, and the person applying for it. With some types of life insurance, your age and health will make a difference to the cost. And if the cover involves payment of a lump sum, the size of the sum will affect the price of the insurance. We recommend you talk to a financial adviser to get an idea of how much life insurance will cost for you and how much you need.
Your financial adviser will ask you some questions to understand your situation, introduce you to a range of options and provide an indication of the costs for your preferred choice. Get in touch with us and we can help you find a financial adviser.
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.
Life insurance is like a financial safety net for your family.
Find out about the four main types of life insurance.
Thinking about life’s risks helps with making a backup plan.
Things to think about when choosing lump sums, wait times and payment periods.
Did you know that life cover can pay out when you’re still alive?