What Extra Benefits Could Be Hiding in Your Life Insurance?
Most people can tell you the main number on their life insurance policy.
“$500,000.”
“$750,000.”
“$1 million.”
Far fewer could tell you what else sits inside the policy.
Life insurance is primarily designed to provide financial support following death or, depending on the product, terminal illness. But some policies contain additional built-in benefits that clients may never notice unless somebody points them out.
Those benefits can vary considerably between providers.
And occasionally, a small section buried in the policy wording can become very important to a family.
Two Policies With the Same Cover Are Not Necessarily the Same
Imagine two families each have $500,000 of life insurance.
The headline amount looks identical.
But one policy may contain an early bereavement payment, repatriation support and an option to increase cover following certain life events.
The other may have a different combination of benefits and conditions.
That does not automatically make one policy better.
It means the details matter.
Here are some examples of benefits currently found in New Zealand life insurance products.
Early Funeral or Bereavement Payments
A full life insurance claim can require documentation and assessment.
Funeral costs do not necessarily wait for that process.
Some policies therefore provide an early payment following death.
For example, Chubb Life currently lists a Bereavement Support Benefit providing an early payment of up to $25,000 to assist with funeral expenses.
Fidelity Life’s current Platinum Plus Level Term wording also provides an immediate advance bereavement payment of up to $25,000, which is deducted from the Life Cover sum insured.
The important detail is not simply that a “funeral benefit” exists.
You need to know how much it pays, when it can be accessed and whether it reduces the remaining life insurance payment.
Repatriation Support
This is one benefit that may be particularly relevant to Halo’s migrant families.
If someone was born overseas, there may be strong cultural or family reasons for wanting funeral rites or burial to take place in their home country.
Transporting a person’s remains internationally can create another significant cost at an already difficult time.
Chubb Life currently lists a Funeral Transfer Benefit reimbursing eligible costs of up to $20,000 to return the insured person’s remains to New Zealand or their home country.
Fidelity Life’s current Platinum Plus wording includes a repatriation benefit subject to its policy conditions, with reimbursement limited to the lesser of eligible direct costs, 10% of the Life Cover sum insured or $20,000. Under that particular wording, the repatriation benefit is additional to the Life Cover rather than deducted from it.
For a family with connections to India, Fiji, the Pacific Islands, South Africa or elsewhere, this is far more than a technical policy feature.
It can affect whether the family is financially able to honour someone’s wishes.
If returning to your country of birth would matter to your family, check whether your current policy includes repatriation support and exactly how it works.
Early Payments Following Terminal Illness
Some life insurance products allow the Life Cover amount to be paid early when the insured person meets the policy’s terminal illness definition.
This can give a family access to money while the person is still alive.
Depending on the circumstances, that money might be used to reduce debt, take time away from work or manage additional costs.
Some policies go further and include partial early payments for specified conditions.
For example, Fidelity Life’s current Platinum Plus Level Term wording provides a Terminal Illness Partial Benefit of the lesser of 30% of the sum insured or $250,000 when specified policy criteria are met.
The definitions are very specific, which is why the wording needs to be checked rather than relying only on the name of the benefit.
Support After a Claim
Some life policies include benefits that people would not naturally associate with life insurance at all.
Under the Fidelity Life wording reviewed for this article, an eligible lump-sum claim can provide reimbursement of up to $2,500 for grief counselling and, separately, up to $2,500 towards qualifying financial planning or legal advice, subject to policy conditions.
These are smaller benefits compared with the main insured amount, but at the right time they may be genuinely useful.
Increasing Cover After a Major Life Event
Life changes quickly.
You might arrange insurance while single, then buy a home, get married, have children and receive a significant promotion over the following decade.
Some policies contain provisions allowing eligible clients to increase cover after specified life events without undergoing the same health assessment that would normally apply to a completely new application.
Chubb Life currently advertises a Life Events Benefit allowing an increase of up to $250,000 following certain eligible life events without further health assessment, subject to the product’s conditions.
Fidelity Life also includes special-events provisions within the current product wording reviewed for this article.
These provisions can become especially relevant if someone’s health has changed since they originally arranged the cover.
This Is Why Reading the Schedule Isn't Always Enough
Your policy schedule may tell you the main types and amounts of cover.
It may not tell the whole story in plain English.
Policy wording can contain additional benefits, definitions and conditions that are easy to forget after the insurance has been in place for several years.
This is exactly what happened in Halo’s $56,000 insurance review case study.
The client had insurance.
What he did not realise was how several different benefits within that insurance could respond to a heart attack he had experienced two years earlier.
Do You Know What's Actually in Your Policy?
If you have had the same life insurance for years, pull it out and have a look.
Not simply at the amount insured.
Look at the benefits.
Look at the ownership.
Look at what happens after a terminal diagnosis.
Look at whether there is support for funeral or repatriation costs.
And, most importantly, make sure those features are still relevant to the life and family you have today.
Halo Advisers can review existing eligible life insurance policies, explain the benefits you currently hold and compare those benefits with appropriate options available through the insurers Halo advises on.