Time to think about the structure of your Life Insurance?

Life in (and coming out of lockdown) means things have changed for many of us – and that could include your needs when it comes to life insurance.  We thought a few tips around some simple ways you can review your life insurance needs could be beneficial at this time.


Life insurance 3 How can life insurance help you?

Life insurance can help to protect the lifestyle that you have worked so hard to create, as well as the people you love. Maintaining your current cover for as long as you might need it may be the best option for you.  But if your circumstances have changed, there are some simple options you can discuss with your financial adviser, which could mean you don’t need to spend as much on your personal insurance by restructuring your cover.


Different insurance policies  Which premium structure is right for you?

Your life insurance premiums can be structured as either stepped or level. Which structure you choose affects the cost to your premiums over time. You can also choose a combination of both.

Stepped premiums start lower but increase yearly as you get older. This is because your likelihood of claiming increases as you age. As a result, changes in your yearly premiums tend to be gradual.

Level premiums start higher but they usually stay constant over the life of your policy. This makes budgeting easier and can even potentially save you thousands over time. 

Choosing a stepped premium structure might be a good option if you only need insurance in place for a specific period of time – or your need for insurance might reduce as you age. 

Either option could save you money over time, so it is well-worth checking with your financial advisor to determine which option best suits your insurance needs. 


Financial protection  Do you have the best income protection benefit period or sums insured to suit your needs?

Your benefit period is the length of time you receive payments from your insurer if you are unable to work due to one of the reasons specified in your policy. A longer benefit period usually means your premiums are more costly. 

Your benefit period could be two years, five years or until you are aged 65 or 70 years old. As your lifestyle changes, so might your benefit period. Assessing your insurance needs regularly ensures you don’t pay for cover you don’t need. 

For example, if you have young children or have just purchased a new home, you might have an increased need for income protection. However, as your get closer to repaying your mortgage, or have greater financial security, you may decide you no longer need life insurance cover dollar- matched to your initial lending.   


Duration of policy Check your waiting period

The waiting period you select directly affects your premiums for income protection policies. This is the length of time you will need to wait before you can start receiving payments after a claim is accepted. Usually, the longer waiting period you have, the lower your premiums will be. 

Waiting periods can be anything from two weeks to two years.  When setting the waiting period, you might want to consider how long you think you can manage your household expenses without an income. Other factors to consider include whether you have any annual leave that you can use or if you have savings set aside which you could rely on.


Consultation 3 Speak to a trusted expert to help you review your life insurance

Talking to your financial advisor is a great way to help determine if some of these options could be right for you. They can assess your insurance cover and work with you to structure it to suit your budget, lifestyle and circumstances. You may also be able to save money by having all your cover with one insurance company.


The information contained in this article is of a general nature only. It does not take into account your specific financial situation, needs or goals and is not intended to be financial advice. For advice on product suitability, please contact a financial adviser. For policy terms, conditions, limits and exclusions refer to the relevant policy wording. While The New Zealand Automobile Association Incorporated takes reasonable steps to ensure that the information contained in this article is accurate at the time of publication, the information referred to is subject to change without notice

Our insurance partner

AA Life Insurance policies are brought to you by the New Zealand Automobile Association Incorporated and underwritten by Asteron Life Limited.

Financial strength rating

Asteron Life Limited has been given an A+ financial strength rating by Standard & Poor’s.

Financial advice

Our website provides general information about our products and services to help you make choices when it comes to protecting the things in life that really matter. The information doesn’t take into account your specific financial situation, needs or goals and is not intended to be financial advice.

If you'd like to receive financial advice, you can get professional advice from a registered financial adviser.