Seven things to help demystify Life Insurance

We get it - life insurance can be one of those complex topics that swiftly makes itself into the too-hard-basket. Forget the intricacies of underwriting – I’ve got dinner to make!

So, we thought we could help by pulling together seven things that might just surprise you about life insurance, as we set sail on S.S. Demystify and work through this sometimes complex topic.

There are certainly many different types of cover out there and plenty of things to consider, so it could also be a good idea to talk to an advisor for help in understanding your options. In the meantime, here are seven things you might not have known about life insurance.


Consultation 2  It pays to keep your policy up to date – but it doesn’t always pay to change it

Things in your life change, and your insurance needs might change too. Milestones like buying a house or having a baby are an exciting time for anyone, but they’re also a good time to revisit your policy and make sure that changes to your situation are reflected in your cover so that your debt and your family will be taken care of if something should happen to you.

As with any insurance, when you review your cover you might decide that another insurer could offer you a better deal. But before you cancel your policies and make the switch, it’s important to seek advice.

A new insurer means you will be assessed and underwritten again at the time of switching, so if you have any new medical issues or conditions you might get less cover or higher premiums by switching. An advisor will be able to explain how cancelling your policy might affect you for future cover and help figure out what will suit your future needs.


Different insurance policies  You can potentially save money by setting the right amount of cover

The amount of cover you have in place will influence your premiums. It’s important to have enough cover in place to protect your lifestyle and ensure you and your family will be looked after, but you don’t want to be paying for insurance protection you might not need.

Since your level of cover can be based on things like your income or mortgage repayments, it’s not always easy to figure out. We always recommend using any online tools available, or bringing it up with an adviser, who can help you work through your options, so you know you’ve got the appropriate level of cover in place to meet your needs.  


Consultation 3  Buying online and through an adviser are not always the same thing

A lot of us prefer to shop online for just about everything these days, but it’s important to know that when you’re looking at life insurance, policies you can buy online compared to those you buy through an adviser are not always apples with apples.

Quite often advisers will be able to offer you a wider range of policy options, and more comprehensive cover if you have more comprehensive needs.

But one of the big differences is the difference in assessment – or underwriting - that you will face in the application process. Most adviser-sold policies include comprehensive lifestyle and medical underwriting, whereas online policies often have higher level underwriting. That means that there could be a difference in how comprehensive your cover is, or if you have a pre-existing medical condition your application might be declined online whereas an adviser-sold policy could be tailored more for your circumstances.


Child life insurance  Your kids might be covered too

Many life insurance policies offer an optional extra which allows you to insure your children or grandchildren, as well as yourself, under your policy. It means that if your child is diagnosed with one of the listed conditions, you’ll get a pay-out that you can use to look after them – whether it be for medical bills or to help you to take time off work.

It’s often free to include on your policy (up to a certain amount) but you do need to apply to your insurer for each individual child you would like covered.


Insurance coverage  Payouts are generally tax-free

It’s good to be aware that in New Zealand you don’t pay tax on most life insurance payments you or your estate receive which relate to illness or loss of life – so you can calculate how much cover you need knowing you’ll receive the full amount (rather than tax being taken from that before it gets to you). One exception is any payments you receive under an income protection policy, as income is tax deductible.

You also won’t pay GST on most life insurance premiums, although GST does apply to additional benefits like trauma and income protection cover.


Insurance agent 2  You don’t have to figure it out on your own

Life insurance can be complex, but there is always help available. An advisor can offer you personalised advice to make sure you’re getting the best policy to suit you.


Buy insurance  AA Life Insurance Life Cover Benefits

Below is a helpful summary of the benefits across our Life Cover and an explanation of how you can tailor it to your current and future needs.

  • Funeral Support Benefit $15,000 can be paid as soon as we receive notification of death to help your family with immediate costs**. This benefit helps your loved ones deal with the immediate expenses associated with a death and can ease the burden at this difficult time. When the time comes, we’ll deduct this amount from any later payment of the death benefit.

  • Premium Freeze Benefit Freeze your premiums so they stay the same each year instead of increasing with age. If you use this benefit, your cover amount will be reduced to the level that your fixed premium is able to buy. It’s important to know that this amount of cover will be based on your current age, gender, smoking status and health status at the time of application. You can also unfreeze your premiums from the next policy anniversary.

  • Death or Terminal Illness Benefit You will receive a benefit equal to your cover amount if you die or are diagnosed with a terminal illness. A “Terminal Illness” is one which, in the opinion of an approved doctor, will result in death within 12 months. The benefit will be the cover amount that applies at the date of death or diagnosis.

  • Life Event Increase Benefit Increase your cover amount up to 25% without providing updated medical information. We understand that certain life events can have a huge impact and it may require changes in your life Insurance. You can do this before you turn 60 if you’re getting married, getting divorced or are having children, if there’s a change in salary, if your spouse dies, if you’re taking out a home loan or becoming a carer.

This is a summary only. There are terms and conditions that apply to all benefits. Please refer to your policy documentation.


** Please refer to the policy wording for more information.

The information in this article has been compiled from various sources and is intended to be factual information only. Full details of policy terms and conditions are available from AA Life Insurance or your financial adviser. For advice on product suitability, please contact your financial adviser. While we take reasonable steps to ensure that the information contained in this article is accurate and up-to-date, it is subject to change without notice. NZAA and its related companies does/do not accept any responsibility or liability in connection with your use of or reliance on this article.

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.