1. ‘RATE FOR AGE’ vs ‘LEVEL’ PREMIUM
The vast majority of insurance policies sold in NZ are ‘Rate for Age’ policies. This means the price increases each year in line with your age.
‘Rate for Age’ policies allow you to insure a larger sum because it’s cheaper in the early years, but becomes more and more expensive as we reach our 50’s and 60’s.
Many people still have children at home in their 50’s and often have mortgages, debts and loans well into their 60’s and still need some level of insurance protection.
The smart people use a ‘Level’ Premium option to save enormous sums of money in the long term. This is where you pay more for the insurance cover at first, but after 5 or 6 years break even with the ‘Rate for Age’ premium. Thereafter you’re ahead – meaning you have ultra low-cost Life Insurance you can afford to keep in your later years when most others are letting it go due to the cost.
TIP: ask for a level premium comparison when getting your insurance quote – it’ll save you money in the long run.
2. ‘ACCELERATED BENEFITS vs ‘STANDALONE’ BENEFITS
Another tool to help keep the cost of insurance down is the ‘Accelerated’ benefit. This option only applies to Trauma Insurance and Total & Permanent Disablement Insurance (TPD) when added to a Life Insurance benefit.
The amount of cover for the accelerated benefits can not exceed the amount of Life Insurance cover.
If you select an accelerated benefit, and a claim is paid, the amount of the claim will be deducted from the life cover of your policy.
If you select the stand-alone benefit, the payment of a claim will not reduce the life cover under the policy.
Generally, if any Life Insurance benefits have been paid out as an accelerated Trauma or TPD claim, the original level of Life cover will be gradually offered back to the insured person over 3 years.
An option exists to have a ‘Buy-Back’ of the Life cover after only 12 months from the claim without further medical evidence.
It is important to know whether you have ‘accelerated’ or ‘standalone’ Trauma and Total & Permanent Disablement benefits in case you claim and then discover there is no Life cover left for your family or beneficiaries.
3. HEALTH LOADINGS ON PREMIUMS
When you have current or recent health issues like; diabetes; asthma; overweight/obesity; high cholesterol; high blood pressure, back issues or depression an insurance company may increase the standard premium to reflect the increased ‘risk’ of a claim.
This is called a ‘loading’.
A single health issue could see a premium ‘loading’ of 50%; a more serious condition could see a 100% ‘loading’; multiple health issues could attract a 200% ‘loading’ or more.
Health Insurance policies rarely load the premium – they tend to exclude the conditions.
Only the process of underwriting the policy will determine the actual “‘loading’ percentage, but if enough information is given to your adviser a reasonable estimate can be made before any forms are filled out.
NB: sometimes an insurance company’s decision to ‘load’ a policy due to a medical condition may not align with your Doctor’s view of the medical risk. However, the Insurance industry bases its decisions on mortality tables covering many, many years and 100,000’s of people.
Medical exclusions – If you have ‘pre-existing’ medical conditions, sometimes an insurance company will exclude that condition from the policy instead of loading the premium.
Eg: recent, recurrent or longstanding back issues will always be excluded from an Income Protection or Total & Permanent Disablement policy.
Recent, minor or short-term medical issues can often have the exclusion reviewed in 12 or 24 months if it doesn’t reoccur.
Sport and Pastimes exclusions – If you participate in sports or pastimes that are deemed hazardous….
eg: flying a plane,
……you’ll be asked for more information so the insurance company can assess the level of risk and may impose a loading and/or exclusion for that activity.
NB: Despite mountain biking being hazardous for many people – recreational mountain biking is not yet excluded.
Please ride carefully though!!
“Mike was the first Insurance Adviser to take the time to explain the insurance options in a way that I could easily understand. So I bought some insurance from him and he saved me heaps on my premium.”
– Dan Sutherland, Christchurch