Life Insurance and Terminal Illness Benefit
Life Insurance Cover
Life Insurance cover is something that you put in place for your family so that they will be able to survive financially if you were to die.
You choose how much life insurance cover you need, put the cover in place, pay the premiums and then if you die, that money is available to your family.
Life insurance is used to repay debt (mortgage debt, credit card, hire purchase debt), to pay for funeral costs and to replace the income that you would have generated if you were still alive, so that your family has funds to live off.
All life insurance policies are NOT created equal
- Terminal Illness Benefit (where the insurance policy will pay out some or all of the life insurance cover if a doctor signs off that you are terminally ill.)
- Funeral or Early Payment for Expenses Benefit
- Financial Advice Benefit
How much life insurance cover do I need?
As a general guide, most people aim to have enough cover to pay off all their debts upon their death, as well as $10,000 to pay for a funeral. Most people also aim to have enough insurance to cover the income that would be lost to their loved ones on their death for a period of time.
What do I need to be aware of when I have life insurance?
- Your premiums are paid and up to date.
- You have disclosed everything relevant at the time that you apply for the life insurance cover.
- You haven’t committed suicide in the first 13 months that the insurance policy is in place.
How do we help you with your Life Insurance?
After talking with you, we research all the options available to you, to find the life insurance that is most suitable for you. This takes into account your criteria, whether that is best quality cover, or best cost cover for your needs.
We then assist you to get that insurance cover in place with the least possible hassle to you.
After the insurance is in place, we will keep in touch with you, to answer any queries that you have about your insurance cover. If you have a claim, we are here to assist you with that process, to reduce the stress on you. Payment of claims
Life insurance is the key benefit provided by insurance companies. They pay out on a large range of reasons for death. Here are some examples of claims paid by some of the insurers that we work with:
| Age | Sex | Cause | Benefit Paid |
| 27 | M | Accident | $350,000 |
| 30 | M | Cancer | $32,359 |
| 30 | F | Accident | $445,391 |
| 37 | M | Heart Disease | $370,493 |
| 41 | M | Cancer | $257,315 |
| 46 | M | Cancer | $1,273,233 |
| 56 | F | Cancer | $197,315 |
| 57 | F | Cancer | $500,000 |
| 59 | M | Stroke | $160,045 |
Terminal Illness Insurance and Benefits (TIB)
On modern, good quality life insurance contracts, there is usually an additional benefit – a Terminal Illness Insurance and Benefit (TIB). This means that the policy will not only pay out the value of the policy when you die (as it is designed to), but it will also pay out if you are certified as having a terminal illness.
The reason that this benefit has recently been added to policies (as recently as 1997 a number of companies did not offer this benefit) is to provide financial assistance to ‘sort things out and tidy things up’ prior to death, if required.
While you should expect to have a Terminal Illness Benefit as a standard benefit on your policy, we encourage you to think carefully about why, when and whether you should use the benefit.
Remember the reasons that you put in place life insurance in the first place, to provide funds for your loved ones – after you have died. Also remember that this is a totally separate benefit to your trauma benefit.
Income protection insurance, trauma insurance and total and permanent disablement insurance are designed specifically to provide you with the funds that you need to live off, if you are unable to continue to earn an income because you are injured or ill. These insurances need to be part of your financial strategy, rather than relying on a Terminal Illness Benefit paying out.
Getting a TIB actually paid is not easy. It requires your doctor to acknowledge, in writing that you are likely to die within a specified time period. This is often not a situation that they are comfortable with.
An example of actual wording of a TIB clause is:
Terminal illness is defined as a serious, progressive Illness which has been diagnosed as terminal by an appropriate Specialist and for which the formal prognosis of future life expectancy is less than twelve (12) months.
Terminal Illness Amount The amount payable is the total sum insured for life cover, less a deduction of not more than 5% of the amount insured, to offset the expenses which we incur in making the early payment.
There is no need to have life cover where there is not Terminal Illness Benefit, or where the payout is limited to a certain percentage of the sum insured, or to a maximum payout, whether you think that you will use the benefit of not.
Moneyworks NZ Ltd
P: 0800 225 621
E: contact@moneyworks.co.nz
P O Box 1003, Cambridge 3450
Licensed Financial Advice Provider - FSP 15281
Regulatory Information: Moneyworks is a Licensed Financial Advice Provider (FSP15281), and AML Reporting Entity and is supervised by the Financial Markets Authority.