Question 1

What is life insurance?

Accepted Answer

Life insurance is a contract between you and an insurance company where you pay regular premiums in exchange for a lump sum payment to your beneficiaries when you die. In New Zealand, life insurance provides financial security for your family, covering expenses like mortgages, debts, living costs, and children's education.

Question 2

Do I need life insurance?

Accepted Answer

You likely need life insurance if others depend on your income financially. This includes if you have a partner, children, mortgage, debts, or aging parents who rely on your financial support. Even single people may need coverage to pay off student loans or funeral costs.

Question 3

How much life insurance do I need?

Accepted Answer

A common rule is 10-15 times your annual income, but your actual needs depend on your debts, dependents, and financial goals. In New Zealand, most families need between $200,000-$800,000 coverage. Consider your mortgage balance, children's education costs, and ongoing living expenses for your family.

Question 4

What are the main types of life insurance?

Accepted Answer

The two main types are Term Life Insurance (temporary coverage for a specific period, lower cost) and Whole Life Insurance (permanent coverage with investment component, higher cost). Term insurance is most common in NZ and suitable for most families.

Question 5

How much does life insurance cost in New Zealand?

Accepted Answer

Life insurance in NZ typically costs $30-$150 per month for $500,000 coverage, depending on your age, health, and lifestyle. A healthy 30-year-old non-smoker might pay $40-60/month, while a 50-year-old could pay $120-200/month for the same coverage.

Question 6

What factors affect my life insurance premium?

Accepted Answer

Key factors include: age (older = higher cost), health status, smoking (doubles premiums), occupation risk level, coverage amount, policy type, and gender. Pre-existing medical conditions, family medical history, and lifestyle activities like extreme sports also impact costs.

Question 7

Can you get life insurance if you smoke?

Accepted Answer

Yes, but smokers pay significantly higher premiums - typically 50-100% more than non-smokers. In NZ, you're considered a smoker if you've used tobacco products in the last 12 months. If you quit smoking, you can reapply for lower rates after 12 months of being smoke-free.

Question 8

Will my life insurance premiums increase over time?

Accepted Answer

It depends on your policy type. Level term policies keep premiums fixed for a set period (10-30 years). Renewable term policies increase each year or renewal period. Whole life policies typically have level premiums but cost more initially.

Question 9

How do I apply for life insurance?

Accepted Answer

The process involves: 1) Getting quotes and comparing providers, 2) Completing an application with personal and medical information, 3) Medical exam or health questionnaire, 4) Underwriting review (1-6 weeks), 5) Policy approval and payment setup. Online applications can speed up the process.

Question 10

Do I need a medical exam for life insurance?

Accepted Answer

Not always. Many NZ insurers offer policies up to $300,000-$500,000 without medical exams, using health questionnaires instead. Medical exams are typically required for higher coverage amounts ($500,000+) or if you have health concerns.

Question 11

What happens if you lie on a life insurance application?

Accepted Answer

Lying on your application (called "misrepresentation") can void your policy. If discovered during the claims process, the insurer may refuse to pay the death benefit. Always be honest about your health, smoking status, occupation, and lifestyle. It's better to pay higher premiums than risk leaving your family with nothing.

Question 12

How long does life insurance approval take?

Accepted Answer

Simple applications can be approved in 24-48 hours. Applications requiring medical exams typically take 2-6 weeks. Factors affecting timeline include: medical exam scheduling, medical record requests, and underwriting complexity. Some insurers offer instant approval for healthy applicants under certain coverage limits.

Question 13

Can I get life insurance with pre-existing medical conditions?

Accepted Answer

Yes, but it may cost more or have exclusions. Common conditions like high blood pressure, diabetes (controlled), and depression are often covered with higher premiums. Severe conditions may require specialized insurers. Always disclose all medical conditions during application.

Question 14

Does mental health affect life insurance?

Accepted Answer

Mental health conditions like depression and anxiety can affect your application but don't automatically disqualify you. Insurers consider factors like diagnosis, treatment history, medication, and current stability. Well-managed conditions often result in standard or slightly higher premiums.

Question 15

Does family medical history affect life insurance?

Accepted Answer

Yes, family history of heart disease, cancer, stroke, and other hereditary conditions can increase your premiums. However, it doesn't disqualify you from coverage. The impact depends on the specific condition, age of onset in family members, and number of affected relatives.

Question 16

What if my health changes after getting life insurance?

Accepted Answer

Once your policy is approved and active, you generally don't need to report health changes to maintain coverage. Your premiums and coverage remain as agreed in your policy contract. This is why it's important to get coverage while you're healthy.

Question 17

Can I change my life insurance beneficiaries?

Accepted Answer

Yes, you can usually change beneficiaries at any time by contacting your insurer or updating your policy online. Common reasons include marriage, divorce, birth of children, or death of a beneficiary. Keep beneficiary information current to ensure smooth claims processing.

Question 18

Can I cancel my life insurance policy?

Accepted Answer

Yes, you can cancel most life insurance policies at any time. Term life policies have no cash value, so you simply stop paying premiums. Whole life policies may have surrender value you can claim. Consider the consequences carefully - you may not qualify for new coverage at the same rates.

Question 19

What happens if I stop paying life insurance premiums?

Accepted Answer

Your policy will lapse (become inactive) if premiums aren't paid. Most policies have a 30-day grace period. After that, coverage ends. Some whole life policies may have automatic premium loan features. Term policies simply terminate with no value.

Question 20

Can I increase my life insurance coverage later?

Accepted Answer

Some policies include guaranteed insurability riders that let you increase coverage without medical exams at specific life events (marriage, children, mortgage). Otherwise, increasing coverage usually requires a new application and underwriting process.

Question 21

How do beneficiaries claim life insurance?

Accepted Answer

Beneficiaries should contact the insurance company as soon as possible with the policy number and certified copy of the death certificate. The insurer will provide claim forms and guide them through the process. Claims are typically paid within 30-60 days after submission of complete documentation.

Question 22

Why might a life insurance claim be denied?

Accepted Answer

Common reasons include: death within contestability period (first 2 years) with policy misrepresentation, suicide within exclusion period (usually first 2 years), death from excluded activities, or lapsed policy due to non-payment. Most legitimate claims are paid promptly.

Question 23

Are life insurance payouts taxed in New Zealand?

Accepted Answer

Life insurance death benefits paid to beneficiaries are generally not taxable income in New Zealand. However, any interest earned on the payout while being processed may be taxable. Consult a tax professional for complex situations involving trusts or business-owned policies.

Question 24

Does life insurance cover suicide?

Accepted Answer

Most NZ life insurance policies exclude suicide for the first 1-2 years (called the suicide clause). After this exclusion period, suicide is typically covered like any other cause of death. This clause exists to prevent people from buying insurance with immediate intent to harm themselves.

Question 25

Do I need life insurance if I'm single with no kids?

Accepted Answer

You may still need coverage to pay off debts (student loans, credit cards), funeral expenses, or support aging parents. If you have no dependents and minimal debt, you might not need life insurance. However, getting coverage while young and healthy locks in lower rates for the future.

Question 26

What happens to life insurance during divorce?

Accepted Answer

Life insurance is often part of divorce settlements, especially when children are involved. Courts may require maintaining coverage to secure child support or alimony payments. You'll likely need to update beneficiaries and may need to prove ongoing coverage as part of the divorce agreement.

Question 27

Is employer-provided life insurance enough?

Accepted Answer

Employer life insurance (often 1-2x salary) is rarely sufficient for families with significant financial obligations. It typically ends when you leave the job and may not be portable. Consider it supplementary coverage and get individual insurance for comprehensive protection.

Question 28

Should I get life insurance to cover my mortgage?

Accepted Answer

Yes, if your family couldn't afford mortgage payments without your income. Mortgage protection insurance decreases as you pay down your loan, while term life insurance maintains level coverage. Term life is often more flexible and cost-effective than dedicated mortgage insurance.

Question 29

Am I too young for life insurance?

Accepted Answer

You're never too young if others depend on you financially. Young adults (20s-30s) get the best rates and can lock in coverage before health issues develop. Even if you're single, consider getting basic coverage - you can increase it later when you have more responsibilities.

Question 30

Can I get life insurance if I'm over 50?

Accepted Answer

Yes, but premiums increase with age and health requirements become stricter. Many insurers offer coverage up to age 65-75 for new applicants. Guaranteed acceptance policies are available for older applicants but with limited coverage and higher costs.

Question 31

Is life insurance worth it for seniors?

Accepted Answer

It depends on your financial situation. If you have dependents, debts, or want to leave an inheritance, life insurance can be valuable. However, premiums are high for seniors. Consider if the death benefit exceeds total premiums paid, and explore alternatives like savings or investments.

Question 32

Can I get life insurance with a dangerous job?

Accepted Answer

Yes, but high-risk occupations (mining, aviation, commercial fishing, military) often pay higher premiums or have coverage restrictions. Some insurers specialize in high-risk occupations. Be honest about your job duties during application to avoid claim issues.

Question 33

Do self-employed people need different life insurance?

Accepted Answer

Self-employed individuals often need more coverage because they lack employer benefits and their income directly supports the business. Consider coverage for business debts, key person insurance, and personal financial obligations. Income documentation may be more complex during application.

Question 34

Does frequent travel affect life insurance?

Accepted Answer

Regular business travel to safe countries usually doesn't affect premiums. However, travel to high-risk countries or areas with political instability may increase costs or require policy exclusions. Adventure travel and extreme sports can also impact premiums.

Question 35

What's the difference between life insurance and income protection?

Accepted Answer

Life insurance pays a lump sum when you die. Income protection pays ongoing monthly benefits if you become disabled and can't work. Both are important - life insurance protects your family if you die, income protection protects your income if you become disabled.

Question 36

Should I choose term or whole life insurance?

Accepted Answer

Term life insurance is cheaper and suitable for most people with temporary needs (mortgage, young children). Whole life insurance is permanent with investment component but costs 10-15x more. Most financial experts recommend term insurance and investing the difference separately.

Question 37

Is life insurance better than just saving money?

Accepted Answer

Life insurance provides immediate protection from day one, while savings take years to build substantial amounts. If you die early in your savings plan, your family may not have enough funds. Life insurance guarantees a specific payout regardless of when you die.

Life Insurance FAQs