Needs to Consider with New Zealand Life Insurance Policies

If you are setting up a New Zealand life insurance policy, you can choose basically any lump sum you would like to insure. Some insurers have minimum levels of cover (for example $50,000) or a minimum premium that they will accept (for example $20 a month) and insurers will usually have a maximum amount that you can insure (often $10,000,000). However these limits aside, you can select any figure you would like. For this reason, one of the decisions to make when starting a policy is the amount of life insurance NZ to get. We will look at some of the most common considerations in New Zealand life insurance policies.

First of all, one of the things that people will consider is taking care of any outstanding mortgage debt. Usually people who have a mortgage (particularly if they share the mortgage with another person or have people, like children, who are financially dependent on them), will want to ensure that the mortgage would be paid off in the event that they passed away. Typically people will use New Zealand life insurance to cover the entire outstanding mortgage, however in some cases people will insure less than the maximum. This may be for cost reasons (as insuring a lower amount of life insurance NZ will cost less) or it might be because covering the full mortgage with New Zealand life insurance is not thought to be necessary (for example if a surviving partner could easily cover the remaining portion of the mortgage). Usually though, the entire mortgage amount would be taken care of. 

In a similar way, people will usually think about any non-mortgage debt that they have. Examples could be a business or a personal loan, or credit card debt. This kind of debt needs to be repaid even in the event of death, and for this reason totalling any outstanding debt and adding this amount to the proposed life insurance policies lump sum is important. 

Next, when choosing a New Zealand life insurance figure, people will consider providing for dependents – with children being a typical example. One aspect of this is a “replacement income”. This is basically an amount designed to replace the income that is lost if an income earner passes away. For example if a family has an income earner who earns $50,000 a year, the family could insure a sum equal to this, decide how long they would like this paid for (for example until the children are aged 18) and then factor this into the life insurance NZ lump sum. A replacement income can also be added to life insurance policies for a non-earning partner – for example if a stay-at-home parent passes away, the family can suddenly incur child care costs. These costs can be estimated and added to the New Zealand life insurance sum. 

Another consideration for dependents is whether to add any funds for education. Commonly people will choose to add to their life insurance policies the cost of putting children through university (in some cases the cost of study only, and in others including living costs). As well as university, if other education costs are likely to be high, (for example if private school were preferred) then this can also be added to the New Zealand life insurance sum. 

Finally, when choosing a life insurance NZ sum it’s important to provide for final costs (if these are not easily met through savings). For example including an amount for funeral costs can be important, as can having an allocation within your New Zealand life insurance sum for expenses such as legal fees.

There are other considerations as well (like a bequest to charity for example) however considering each of the above areas will assist in choosing an appropriate life insurance NZ sum.