Firstly, congratulations if you have insured yourself and/or your family by purchasing Life insurance. It is indeed an important aspect of offering protection to your family and your assets should the unthinkable happen.
You would have no doubt seen there are many providers or insurance companies including banks who offer Life insurance. Whether you have obtained your insurance through an insurance broker/advisor or purchased it directly either through a bank or online platform; have you ever wondered if all Life Cover is the same? Is it just the premium that is the major difference?
Well let me tell you, while all Life Cover policies pay out upon the death of the life assured, not all providers have the same benefits or have added benefits. There are some providers whose products offer more benefits and are already included in their premium at no extra cost, some providers have extra benefits but will cost extra to include these options while some providers have no extra options included.
What more can be included in your Life Cover?
You are probably asking, if Life Cover pays when you die, what other extra benefits can be included? What if I tell you, you can also claim on Life Cover before you die?
1. Terminal Illness Benefit
When someone has been diagnosed as Terminally Ill, they most likely have a disease or condition that cant be cured and is likely to lead to their death. It’s sometimes called a life-limiting illness.
Some life insurance policies include a benefit called Terminal Illness; this makes it possible to claim on your life insurance even before you die; subject that you meet the insurance company’s “definition” of terminal illness. Some companies define terminal illness as “likely to die within 12 months” while some are stricter requiring prognosis that life assured is expected to pass away within 6 months.
While this is not something any of us want to think about, having access to life insurance funds at this time can help prevent financial stress at such a difficult time. This early payment of your life insurance can also give you the financial ability to tick off your bucket list items, maybe you would like to take your whole family on a holiday to create beautiful memories and for them to hold onto when you’re gone. Maybe you want to spend a night or a week at the most luxurious resort and the list goes on.
2. Terminal Illness (Advance/Partial) Benefit
Now that it is much clearer that your Life insurance can potentially pay a claim before you pass away under the Terminal Illness benefit, there still may be a challenge to meet the criteria.
That challenge is getting a confirmed prognosis from qualified medical professional(s) that the illness or condition is incurable, and they are certain it is likely to result in death in the next 12 months or so. It may take quite a bit of time for medical specialists to confirm your illness may be terminal as they will have to conduct a series of tests and research and it can take many months for the result to come.
Until this is confirmed and provided in writing, there isn’t much your insurance companies can do. Some insurers have been proactive and provided a “list” of conditions that generally don’t have a cure such as “Motor Neurone Disease”. These conditions qualify for early payment of Life Insurance even before you get a prognosis from a specialist that you are deemed terminally ill. You can get paid 30% of your Life cover and maximum amounts of anywhere between $250,000 to $600,000 depending on which insurance provider you are insured with.
3. Funeral Benefit
Yes, most life insurance policies have funeral cost benefit included in your policy. You may ask why this benefit is even needed given that you will be paid your Life Cover benefit upon death anyway? This is a very valid point, if your family gets access to your life insurance pay out immediately and it makes this benefit somewhat irrelevant in this case.
However, what if you don’t get the life insurance claim immediately? Remember to claim on any life insurance benefit you need to complete forms, provide evidence and go through a claim process. This “process” can sometimes be delayed or require further evidence. One of the main forms of evidence required for a life insurance claim is a death certificate issued by the coroner.
We have seen many cases where someone has suddenly passed away without any diagnosed medical condition. In such cases their death is “referred to a coroner”. This is where it can get challenging as it takes many months for the coroners’ office to complete examination and provide their final report. In one case, we had a client’s report finalised after 18 months since they passed away.
So you can now see, while funerals cannot be delayed for months, it is important to ensure that some funds can be paid early; this is where most insurers have an early pay out of the life insurance under their “Funeral benefit”. How much is paid under this benefit also differs between providers, it can range anywhere between $10,000 to $25,000. Some bank policies such an BNZ pay only $5,000. Is that enough to cover funeral expenses?
4. Repatriation Benefit (Funeral Transfer)
Another benefit included with some major providers is called a Repatriation benefit or Funeral transfer benefit. This allows the life assured’s family to bring the body of the life assured back into New Zealand should they have passed away while outside of New Zealand.
It is important for the family that they choose your final resting place as this is more for their peace and comfort and having a gravesite helps with the grieving process, hence the need to bring the body home rather than having the funeral done overseas. For that reason, it makes a lot of sense that insurance companies have benefits that can pay a portion of the life insurance claim early to be able to repatriate the body for funeral while the remaining life cover amount goes through a claim process.
Some insurers now also allow the body to be taken outside to New Zealand to the deceased’s country of birth. An important consideration for someone who may not have family here in New Zealand, it is equally important for their family to be able to take the body back for final rites and rituals as the case might be. The amount payable under this benefit can also vary between insurance companies, some pay up to
maximum $20,000. Some pay in addition to the Life Cover benefit and at no extra cost. While some bank policies do not have this benefit at all.
In summary
So there you go, this should give you a clearer understanding that Life insurance policies can offer so much more. Therefore it is important to work with an insurance broker or advisor and get a good understanding for what you are actually paying for. I mean it doesn’t hurt to have a policy that has more benefits built in for the same price right?
Remember life insurance isn’t about you, its about those who are left behind when you are not there for them.
If you have any questions or wish to know more, please feel free to contact Halo Advisers Limited who are insurance advisors based in Auckland on 0211835835 or email us on info@haloadvisers.co.nz.
