About 80% of life insurance policies sold in NZ are simply not designed for the long term, because premiums increase every year. At your annual renewal the bank or insurance company calculates that you are older now and therefore at a higher risk of something unforeseen happening to you.
Premiums therefore go up.
A ‘Rate for Age’ premium is like taking out a new policy every year.
The problem is as you get closer to 40 and 50 and beyond the increases get horrendous. Obviously your older and the risk is higher and banks and insurance companies really don’t take any account of you being a client for many years.
Instead increase prices every year.
Many people cancel, because of skyrocketing premiums.
What can you do about it?
You can lock in fixed premiums, that dont increase for 30 or 40 years. Premiums that don’t increase with age is unknown to most New Zealanders.
There’s a couple of reasons for that:
First, most frontline workers at the main banks wouldn’t know anything about them, nor do many of the banks have any of these options available.
Second, they are not as profitable for the banks and insurers.
Advisers and retailers are rarely rewarded the same for providing these fixed premiums to clients.
In general, someone with a fixed premium cover will keep their insurance in place for a much longer time, than someone with a ‘stepped’ premium cover, because the fixed one, is so much more affordable.
Level rates will normally save you tens of thousands over the life of the policy. Furthermore, your will know exactly what the cover will cost you over the long term.
For more information about life insurance policies, please contact the expert contributor.