Understanding the basics of life insurance guarantees that you'll get the policy you need at a price you can afford to create a financial safety net and protect your loved ones.
In this article, we'll walk you through the benefits of life insurance, additional features and types of life insurance.
What are the benefits of life insurance?
- It helps protect your family’s finances by providing your family with financial resources in the event of your untimely death and will pay your beneficiaries money to ensure they can continue to be financially supported.
- Tax-free one-time payment. Under New Zealand tax laws, you do not pay any income tax on any life insurance benefits you receive, provided they are taken out for personal use. This means that, following receipt of the benefit, the policy owner is not required to declare the lump sum payment to Inland Revenue, as no liability for income tax for the payment exists.
Some additional features that your Life Insurance contract may include:
Different Types of Life Insurance Explained
There are many different options for buying life insurance but it’s actually not as complicated as it may seem. When it comes down to it, there are essentially two kinds of policies: term life insurance and whole life insurance.
- Term life insurance lasts for a specific amount of time (the term) and expires at the end of the term. The term can be anything up to aged 100.
- Whole life insurance, on the other hand, is a form of permanent life insurance and lasts your entire life. Whole of Life is not available in New Zealand anymore, although there are many existing contracts in-force. If you have to assist to settle a parent’s estate, you may well find they have one of these policies in force.
The most common type of life insurance is 'term life’, which provides cover for a period of time such as 25 years or to a specific age, such as 70 or 80 or until your death. Term life insurance pays your estate or your chosen beneficiaries the sum assured if you die within the period set out by the policy.
This post is an excerpt from our new Life Insurance Guide that aims to make insurance easier to understand and therefore making it easier to make the right decisions when it comes to protecting what's important. You can read the full Guide here.