0800 141 889Why Kiwis Shouldn’t Take Out Cheap Life Insurance Policies Without Considering This Factor
You could easily save thousands of dollars every year if you switched to policies with level premiums.
Paying a lower premium doesn’t necessarily mean that you’ll save money.
Here’s why.
Once you’ve narrowed it down to a few life insurance policies with adequate coverage, your
hunch is to choose the policy with the lowest premium, right? Don’t jump the gun too quick.
You could be paying thousands of more dollars in the long run than if you were to choose a
policy with a slightly higher premium right now.
How does this work?
Opt for level premiums that don’t shoot up annually
Most people opt for insurance policies with stepped premiums.
These premiums seem to be the cheapest options initially, but what
most people don’t know is that this policy type isn’t sustainable in
the long run since premium prices increase annually. Instead switch
to policies with level premiums. You might think these premiums
are costlier as compared to stepped premiums at first, but after
8 to 10 years, your stepped premium will be higher than a level premium.
If you want life insurance until retirement or beyond, a level premium will save you thousands
of dollars, or possibly, tens of thousands even! The younger you are when you take out level
premium life insurance, the more you will save.
Level premiums are based on your age when you take out the policy and they don’t
increase in line with your age each year.
Stepped (also known as ‘rate for age’) premiums are calculated based on your age at the time of
taking out the policy. The older you are, the higher your premium will be and as you continue
to age, the premium increases in successive years. There is no certainty regarding the rate of
premium increase – just that as you get older, the rate of increase in premium only continues
to shoot up. For example, in your 20s or 30s, your premium might only increase by 2% or 3%
every year, but in yours 50s, the annual increase might be 10% or 15%!
To maximise your savings, lock in your premium while you’re still young since premiums increase with age to reflect the increasing health risk people may pose.
Why get life insurance at all?
Life insurance protects not just you, but also those around you.
After you breathe your last, your family will be grieving – and then the bills will start to pour in.
Mortgage, funeral services, and more – you don’t want to leave your family in financial ruin at
a time when they’re least equipped to handle it.
Life insurance cover ensures that your beneficiaries are paid out a tax-free lump sum after your
passing so that you can rest in peace knowing that your family is financially secure.
Quit fooling yourself – you still haven’t chosen the cheapest
policy just yet.
How do most people choose the “cheapest policy”? They scour the web
for different providers, make multiple phone calls, and then spend hours
comparing the pros and cons manually.
Other people just visit the closest insurance provider and choose
among policies provided by just that one provider. These insurers are
often biased, and will insist you take out policies that put them at a
monetary advantage
What people don’t know is that the process of narrowing down suitable life insurance today is
a lot more efficient and straightforward. This online calculator, for instance, is an example of a
tool – available free of cost – that sorts through hundreds of life insurance policies based on
your needs in a matter of seconds, following which it offers up quotes so that you yourself can
make an informed decision. Request your quotes now.
You can also discuss your quotes in detail with qualified insurance advisers – not insurance
agents – to ensure you’re getting the best deal. Agents work for a company, whereas advisers
aim to serve you and your needs in an unbiased manner.
To zero in on the best fixed-price level premium life insurance,
make sure it offers the following benefits:
- Lump sum payout
- Terminal illness benefit
- Bereavement support benefit
- Bringing your loved one home in case they pass away abroad
- Financial and legal advice
- Grief counselling
- Cover included for your children
- Cover for pre-existing conditions like diabetes
- Cover for high BMI
- Cover for non-residents or non-NZ citizens
- 20% of first year’s premium paid out upfront after first premium payment on a 24-month contract
- Free Will Kit valued at $125 on a 24-month contract
- Multi-life discounts
