Understanding Life Insurance Cover
Life cover is a legal contract between a policyholder and an insurer. A life cover policy basically ensures that the insurer pays out a regular amount of money to designated beneficiaries in case the insured becomes sick or dies prematurely, in return for regular monthly premium payments from the policyholder. The beneficiaries can be anyone, including friends and family. However, it must be ensured that the beneficiary receives the death benefit only if the insured was the primary wage earner in his or her life and that he or she had been paying into the policy for the prescribed time period. If these conditions are satisfied, then the amount of the monthly premium will be paid directly to the beneficiary.
Most of us don’t bother about life cover policy until we become seriously ill or die. However, there are several financial advisors who believe that life insurance should not be looked at as a long term investment vehicle. Instead, they feel that it should be looked at as an additional insurance protection against unforeseen circumstances such as loss of employment, inflation and death. To get the maximum benefit from a life cover policy, it is necessary to understand how the policy works. This understanding can be gained through use of life insurance calculators and tables.
Life insurers provide life cover policy benefits on the basis of certain risk factors. They are mortality, accident and critical illness risk. Mortality risk is calculated as the total life expectancy at the time of death, less any known illnesses which might develop in the period of life covered. Accident risk refers to the probability of death occurring in the period of cover. Critical illness cover is treated as a rare event where the insured may suffer a critical illness which will cause a terminal illness within a very short period of time, for example within twelve months of the beginning of the policy.
The premiums on a life cover policy are determined by many factors. The age at which the cover is bought, your gender, occupation and your health status. If you smoke or drink, or you are older than fifty years old, you will generally be offered reduced premiums.
When applying for a New Zealand life cover, there are a number of ways in which you can make savings. One way is by increasing the amount of coverage that you require. If you are young and healthy, you may choose to limit your cover to a level that reflects your age and health at the time of application. You may also wish to consider taking out a new vehicle or home if you reside in New Zealand. As well as these examples of saving, you can also choose to borrow money against the payout should you need it.
The level of cover that you require will be determined by your age, occupation, family history of illness and whether you are a permanent resident or not. There are some providers who are able to offer you a lump sum payment for your cover but others may require you to carry out regular health checks. For example, if you are a permanent resident, you may have access to some New Zealand health schemes, but others may only offer certain treatments.
In order to get a competitive rate for your cover you need to know how much you will be paying. You can do this by using an online calculator or by talking to an independent financial advisor. You can find out how much you could save over the course of twelve months by knowing your premiums. Younger people may save more due to their lower rates of illness, but the amount they could save over the course of twelve months would be affected by their earnings. If you have permanent medical insurance you may also save money on your premiums because you may have terminal illness, which is covered by the cover.
Regardless of whether you are a permanent resident or not, you will have to pay a sum towards your cover each month. The cost of your cover will depend on a number of factors including your age, the amount of cover you require, your earnings and the type of life insurance policy you choose. Some policies provide a lump sum payment if you become incapable of work for twelve months or more. You should check the details of your policy and the amount it covers before making a decision on which life insurance policy to go for.