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  1. #1

    Default Life insurance vs Income protection insurance

    I don't find anywhere I can ask about insurance, so I am writing here and hope it is okay because it can be related with property issues such as 'mortgagee payment'.

    I wonder whether taking life insurance is worth in mid 50's. It costs $1900 per year for $500K cover. I have not looked into the policy that well, yet or I read it roughly and am not sure whether I understand it well enough.
    Do you have experience with life insurance?
    Is there anything that one has to be particularly careful when choosing a life insurance?
    Also, any suggestions for a good life insurance company?

    Instead of life insurance, would income protection insurance be better?

  2. #2

    Default

    Quote Originally Posted by nano View Post
    Instead of life insurance, would income protection insurance be better?
    Two different things. Life insurance pays out if you die, income protection pays out if you're alive but can't work or lose your income. To be covered you need some form of both.

  3. #3
    Join Date
    May 2004
    Posts
    2,745

    Default

    Depends a huge amount on circumstances. My suggestion would be to check out Consumer.org.nz. They have a lot of information about various insurances, including what not to buy.

    You can sign up for a month online access for a small fee or try your local library. Librarians will help with finding index issues for you.

    Insurance salespeople will try hard to sell so well worth having some good information first.

  4. #4
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,562

    Default

    Hi Nano,

    Talk to a risk advisor. They sell life insurance, trauma cover, income protection insurance, mortgage repayment insurance etc. Note they will be trying to get a commission, but still will be the best place to advise you. Try to avoid banks, as they generally have a crap product!

    Think about
    - What happens if you die? Is your family in an OK position? Or do they have large debt, low income and in a bad position? Life insurance could help with this and is generally quite cheap
    - What happens if you get cancer, heart attack or something serious? Not dead so don't get life insurance. Not an accident so no ACC. Do you need a lump sum payment to help you through the hard times? This is Trauma
    - Income protection sort of links in with Trauma. If you can't work it gives you a pay out. Based on earnings.
    - Mortgage repayment insurance can be better sometimes if earnings a bit variable or hard to prove.

    Someone I know got cancer about a year ago. We put them onto a broker before this, so they got over $100k trauma payout, and monthly income protection coming through. A year later this person has more issues, and has had a year of work. Trauma meant they had a cool holiday to help get over the emotional trauma. The income protection has enable this person to survive with no work for other 12 months.

    It is worth considering seriously!

    Ross
    More Profit from Property? TEACH ME MORE
    Ross Barnett - Coombe Smith Property Accountants
    Proud to give the best property advice for over 13 years.

  5. #5
    Join Date
    Aug 2009
    Location
    All of New Zealand
    Posts
    832

    Default

    Agree with Rosco, seek a professional Adviser.....here's my recommendation.......

    http://solutions.gen.nz/our-team
    www.ilender.co.nz
    Financial Paramedics

  6. #6

    Default

    Risk advisor sounds good to me.
    - Income protection sort of links in with Trauma.
    - Mortgage repayment insurance
    I agree that I think we need this kind of insurance.
    Consumer org compared 20 life insurances, but dos not have AIA.
    I found that AIA did not have a good review in 2015 in other country. In fact, they received 'worst' claim rejection.

    I learned that life insurance cover $500000 is reduced every year as you get older! So, in the end you don't even get payed 500K. In order to keep it as 500K, your premium goes up!
    It is like my car insurance. sum insured - that sum (value) was reduced every year, but the premium stayed the same or went up. Similar...

    Thank you very much for your very helpful advice.



  7. #7
    Join Date
    Aug 2009
    Location
    All of New Zealand
    Posts
    832

    Default

    Quote Originally Posted by nano View Post
    Risk advisor sounds good to me.
    - Income protection sort of links in with Trauma.
    - Mortgage repayment insurance
    I agree that I think we need this kind of insurance.
    Consumer org compared 20 life insurances, but dos not have AIA.
    I found that AIA did not have a good review in 2015 in other country. In fact, they received 'worst' claim rejection.

    I learned that life insurance cover $500000 is reduced every year as you get older! So, in the end you don't even get payed 500K. In order to keep it as 500K, your premium goes up!
    It is like my car insurance. sum insured - that sum (value) was reduced every year, but the premium stayed the same or went up. Similar...

    Thank you very much for your very helpful advice.


    Always pays to seek impartial advice!
    www.ilender.co.nz
    Financial Paramedics

  8. #8
    Join Date
    May 2004
    Location
    Christchurch
    Posts
    556

    Default

    It depends on your circumstances and who will benefit. If you have mortgages and dependents life insurance is important as they will need to carry on paying the mortgage once you are gone.

    If it is just you and no one really needs the death benefit once you are gone then life insurance isn't that useful. Income protection protects you so if you cant work due to illness you can still pay the mortgage.
    Some life insurance policies have critical care riders which bring forward all or some of the sum assured if you are diagnosed with an illness where you are expected to die within a year. Then that would benefit you. The conditions are very strict to claim it.

    You can go to a broker as they are officially independent but often they are guided more by which insurance company pays them the most. They tend to put all business through one company often as the insurance companies pay volume bonuses to put all the business their way.

    I would prefer to choose a reputable insurance company and go to one of their tied advisers.

    Don't go on just price without asking for the full policy documents and comparing each company's cover clause by clause. Some companies have exclusions that make them seem cheaper but they arent apples with apples.

  9. #9

    Default

    I was just wondering after you are gone, whether bank would insist to pay off mortgages or sell the property because they are afraid of mortgagee repayment of the left ones who do not have earnings.
    What happens if breadwinner dies without life insurance? Would bank force to sell the investment property because you do not have the ability to earn income?

  10. #10

    Default

    Quote Originally Posted by nano View Post
    I was just wondering after you are gone, whether bank would insist to pay off mortgages or sell the property because they are afraid of mortgagee repayment of the left ones who do not have earnings.
    What happens if breadwinner dies without life insurance?
    A friends sister-in-law is going through those questions right now, only her deseast husband has some insurance cover. Late 30's, healthy, it was completely unexpected. Over a month later and everything in his and joint names remains frozen. Mortgage, car, credit card, etc all need their regular payments to continue like clockwork but bank accounts and benefits are frozen, she can't touch them. Could be several more weeks before insurance is released. Her and the kids are surviving on family handouts in the meantime.

    You don't just need insurance. Each person needs a cash supply, in their own name, to tide them over until maters are concluded.


 

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