Hoping for the best, preparing for the worst

Most people insure their home and contents. Fewer consider the potentially devastating financial consequences of the unexpected death or illness of the main care-giver, or provider for their family.

What is Life insurance?

At its most basic, Life insurance provides a lump sum payment to the estate of the insured, on his or her death. Should the insured have a terminal illness and a life expectancy of no more than 12 months, then the lump sum will be paid early.

Other Lump Sum insurance covers include:

Trauma Cover: provides a lump sum payment to the insured if he or she is diagnosed with certain defined major or ‘critical’ medical conditions such as heart attack, stroke, cancer, paraplegia, major organ transplant, etc.

Total and Permanent Disablement (TPD): provides a lump sum payment to the insured if he or she suffers an injury or illness which totally and permanently incapacitates them, preventing them from working again.

What can these lump sum payments be used for?

The lump sum payments can be used for anything; in most cases, however, the payment provides financial security for the insured’s family, for:

  • Funeral expenses;

  • Paying rent/mortgage;

  • Supplementing lost income;

  • Reducing or paying off debt;

  • Paying for a family member to take time off work to assist with caring for the insured or his or her children;

  • Costs such as homecare, child care, or house modifications such as accessible shower rooms or ramps; 

  • Alternative treatments not covered by health insurance; or

  • For the insured to take time off work to rest and recover in the event of Trauma. (Many people recovering from a serious illness want to work reduced hours even if they are still physically able to work.)

What is the difference between Life and Health insurance?

While Life insurance pays out a lump sum on the death of the insured, Health insurance offers access to timely private treatment and the choice of medical provider. It is designed to cover hospitalisation and surgery including: cancer care; home nursing; treatment away from your home within New Zealand; and, in some cases, treatment overseas. Health policies may also cover optional benefits of specialist and tests, GP visits, optical and dental treatment.

What should you do?

  • It seems counterintuitive, but you should really purchase Life insurance when you are fit and healthy as premiums will likely be more competitive.

  • Investigate any additional add-on benefits that may be available (even if they may cost a little more). A good example is a future insurability option, which gives you the option of taking out additional Life Insurance at a future date without the need to provide further medical evidence.

  • Insure both yourself and your partner. It is a common mistake to only purchase Life insurance for the main income earner. This can have tragic ramifications for the family if the main income earner is unable to work because he or she must take on the main care-giving role.

  • Investigate the range of premium options available to you. Consider a Level premium – this enables your premiums to remain level for the life of your policy. Although these premiums tend to be more expensive initially, if you are young and require the Life insurance for over 15 years, then this is a very good option to consider.

  • Review your policy annually. Everyone’s circumstances change from time to time (marriage, children, additional debt, divorce, more children and the list goes on). It is vital that you review your policy to ensure your Life insurance keeps up with your needs and remains fit for purpose.

How much insurance should you have?

This is a very important question; and there is no scientific answer.

The best way to ensure you have the right amount of cover in place is to discuss your requirements with an advisor who will work through a number of metrics with you and make recommendations.

It is vital that you have sufficient cover in place to protect your home, cover any loss of income and provide for your children in the event of the early demise of you or your partner.

How Aon can help

Aon has a nation-wide team of experienced advisors who will provide detailed, professional advice to ensure you have the best insurance cover in place to suit to your individual requirements. For more information on how Aon can help, please contact us.

Author

Nigel Webb  |  Aon New Zealand  |  nigel.webb@aon.com

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This website contains general information only and does not take into account your individual needs or financial situation. It is important to note that limits, excesses, terms and conditions and exclusions apply to the products and services outlined on this website. Please refer to the relevant policy documents for details of cover, the provision of which is subject to the insurer’s underwriting criteria that apply at the time. Please contact us if you have any questions.