What type of life insurance might be right for me?

What type of life insurance might be right for me?

Once it’s clear that some kind of life insurance is in order (because you’re getting married, buying a house, having a baby or starting a business), the next big question is ‘what type?’

Like so many other things you buy, life insurance comes with options. And every available option leans towards a specific kind of need and a different form of financial protection. The ‘big four’ are life cover, trauma cover, income protection and total and permanent disability (TPD) cover.

Here we take a look at each of these, what they do and who might need them:

Types of life insurance.

1. What is life cover?

Life cover, also known as life assurance, is designed to pay a lump sum if you (the insured person) die or receive a terminal illness diagnosis with less than 12 months to live. It can be useful for anyone with dependants (a partner, children, parents or family members) who may rely on you for financial support.

The payment that’s made with this type of life insurance protection can be helpful to assist with outstanding debts, such as a mortgage or other kind of loan, or general living costs.

 

2. What is trauma cover?

Trauma cover, aka critical illness or injury cover, is designed to pay a lump sum if you (the insured person) are seriously injured or diagnosed with a condition that meets the criteria defined in your policy document. So if something happens to you and you can’t work or get landed with significant medical costs, trauma cover is there to minimise financial impact. 

A trauma policy provides cover for a specific list of conditions. There are too many to name here, but you can see the Fidelity Life list in our customer brochure. It includes well-known serious conditions, like cancer, loss of a limb, heart attack, and deafness or blindness. It also includes diseases often associated with age, like Alzheimer’s and Parkinson’s. Plus there are the things you don’t hear about so often, like multiple sclerosis and a major organ transplant. The list includes more than 40 conditions and illnesses.

Trauma cover is a way to protect your financial wellbeing from the risks of severe ill-health or injury.

 

3. What is income protection cover?

Income protection cover, sometimes called income replacement insurance, is designed to protect your ability to earn an income. 

If you can’t work for a while, because you become disabled or suffer an extended illness, where will the money come from to pay for food, rent or mortgage payments, utilities and the other basic expenses of life? Every year in New Zealand, about 55,000 people have an illness that means they can’t work for three months or more.*

With Fidelity Life Income protection cover, up to 75% of your gross annual income can be covered. Once your claim is approved, you get a monthly payment. When you take out this cover you select a monthly amount, how long you want to wait before a payment can be made and how long you’d like payments to last, while you are sick or injured and couldn’t work.  This can help provide an income to cover your daily living costs.

You can get income protection cover to benefit yourself if something happens to you. It can also be helpful if you’re supporting other people by providing an income for you and your family. 

 

4. What is TPD cover?

TPD (total and permanent disability) cover is designed to pay a lump sum if you become totally disabled and are unable to work – ever again. And by work we mean all kinds of work – paid work, work in the home, and in some cases study.

The payout you get from TPD is a lump sum. You could pay off a home loan, pay for modifications to your home if you become disabled, or pay for medical care that isn’t funded by the public health system.

With a Fidelity Life TPD claim, the lump sum will be paid if your disability means you won’t ever to be able to perform your usual or any other occupation. For some professional groups, this can be narrowed down to just your usual occupation.

 

Talk to an adviser to make the right choice for you.

To better understand what type (or types) of cover you need, as well as how much to get, we recommend you talk to a financial adviser. It’s a way to ensure you’ll get cover that’s suitable for your needs.

 

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.

*mindthegap.co.nz – ‘How long could you survive without an income?' 2015 

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