Life insurance can seem like a confusing topic when you’re trying to decide if you need it and also try to cut through all the financial jargon. We’ve simplified everything for you so you can make an informed decision. Essentially, if you’ve been thinking about what your family would do financially when you pass away, then you’re in the right place. So, let’s get started…
What is life insurance?
Life insurance in New Zealand is a type of insurance policy designed to pay a cash lump sum upon the death of the policyholder. It provides financial support to the policyholder's loved ones or estate to help with financial commitments, such as mortgage repayments, bills, or other life costs.
Life insurance is essentially a product that protects your loved ones by offering financial assistance during a difficult and emotional time, when they need to cover the costs associated with life and other related expenses.
It can also bring peace of mind for both you and your family, knowing that you have a life insurance policy in place should the worst happen.
How does life insurance work in New Zealand?
It works by having the policyholder pay regular premiums to keep the insurance policy in place. In the event of the policyholder's death, a lump sum payment is provided to their beneficiaries or estate. This sum could cover the various expenses that you leave behind, so your family doesn’t have to struggle or could be a legacy to help your children get their start in life.
How much does it cost?
The cost of life insurance can vary significantly based on several factors, including your age, smoker status and the amount of coverage you want.
How do I decide how much coverage I need?
When deciding how much life insurance you need, there are several factors to consider. First, think about how much you contribute to the cost of your lifestyle, which may include expenses like your mortgage, bills and even day-to-day expenses such as food. Make sure to consider any outstanding debts or financial obligations you want the insurance to cover.
Also, consider your family's financial situation and your own savings. The goal is to ensure that the insurance coverage is enough to relieve your loved ones of the financial burden associated with your life and related expenses. It's wise to strike a balance between having adequate coverage and avoiding over-insurance, which can result in higher premiums than necessary. Assess your unique circumstances and financial needs to determine the appropriate level of life insurance.
Lastly, you might want to consider funeral expenses and the associated planning which comes with several costs. The core expenses often include the services of a life director, who manages various aspects of the life, including transporting and preparing the deceased, arranging the ceremony, and providing support to the family. The choice between burial or cremation brings additional costs, such as cemetery plots, headstones, or crematory services.
Funeral ceremonies can include costs for things like venue rental, officiant or celebrant fees, and various memorial items like flowers and printed materials. Other expenses include legal fees for obtaining death certificates, transportation of the deceased, and, in some cases, catering for post-life gatherings. Overall, the total cost can vary significantly based on location, cultural and religious customs, as well as personal preferences. So, it’s essential to plan and budget carefully to ensure an appropriate send-off.
Benefits of life insurance
Life insurance provides several benefits to policyholders and their families, including:
- Financial Support: Life insurance offers financial assistance to help cover the expenses your family will face after you have gone, relieving them of the financial burden during a challenging time.
- Coverage Flexibility: Policyholders can choose the coverage amount that suits their needs, ensuring that their specific life expenses are adequately covered.
- Peace of Mind: Life insurance offers peace of mind, knowing that your family will face fewer financial challenges without you. This allows them to focus on the emotional aspects of the grieving process.
- Tax-free, lump sum payout
With these benefits, we aim to bring you peace of mind, knowing your loved ones will be looked after during a difficult time.