If you’re asking yourself “do I need Life Insurance?” and tying yourself up in knots, let us help. In this article we’ll help you decipher Life Insurance jargon and get your head around premiums, policies and providers.
We understand Life Insurance can feel really overwhelming. Life is busy, and sorting out the right policy is easy to push to the bottom of your to-do list. Depending on your life stage, getting your insurance right is key for peace of mind and protection for you and your loved ones.
We’ve grouped together key concerns and questions we often talk to our customers through when they’re starting their Life Insurance journey with us.
Can I trust my Life Insurance provider to give me good advice?
The Reserve Bank of New Zealand (RBNZ) and Financial Markets Authority (FMA) recently published a review on the conduct of New Zealand’s Life Insurance industry, highlighting that some providers aren’t actively providing the best service for their customers’ needs.
Given the results of this report, it’s understandable that Kiwis are wary of insurance providers. It’s a commitment, after all. Cigna is also committed—to making sure you can trust us and our insurance recommendations for your life stage.
When you come to Cigna for advice on a Life Insurance policy, the first thing we do is conduct a full needs analysis, to work out if you need Life Insurance. We use independent third-party data, which provides comparison quotes from other customers in similar life situations to you. And if Life Insurance isn’t suitable for you right now, we’ll tell you that.
Comparing Life Insurance providers
Life Insurance reviews can sometimes confuse more than clarify, but it’s worth taking the time to compare providers to make sure they’re the best fit for you and your life stage. Getting Life Insurance quotes from providers will make your decision a lot easier. Cigna provides useful resources, information and free quotes to allow you to make an informed choice about your potential Life Insurance provider. This is a great option if you don’t have a lot of time to wade through Life Insurance comparison websites! There are a lot of third parties, such as Insurance Brokers, who can assist here, too.
Some customers find it difficult to work out the difference between insurance brokers and purchasing Life Insurance directly. Insurance brokers are sales people who have relationships with a lot of different insurers. Brokers work closely with clients to better understand how much cover they need and what is important to them. Once they have that information, the broker will then present back a few options that are best suited to their client and provide advice about the pros and cons of each policy.
Cigna’s acquisition of OnePath Life (NZ) from ANZ in 2018 broadened our offering to make sure we’re keeping up with the changing needs of New Zealanders. Customers can now purchase Life Insurance via OnePath Life (NZ) wealth specialists and independent advisor channels, too.
Cigna offers the option to purchase insurance directly. This means there is no need to speak with an advisor or an insurance broker - simply go to our website, where you can find policies and information depending on your life situation. We can create a personalised quote for you to make a decision in your own time.
Understanding Life Insurance Jargon
We understand that Life Insurance can seem like a labyrinth of complex terms, policy names and jargon. Claims, policy, dependents, ombudsman, payouts? It can seem like a lot to learn.
Let’s go through a few terms to get you started, with help from Cigna’s Life Insurance glossary. It’s available on our website if you ever wonder what something means.
Policy: this is a contract between two signatories (that’s you, the policy owner; and us, Cigna, the policy provider). It’s the agreement that if the policy owner dies, the people left behind will be paid the agreed sum in the contract by the policy provider under the terms in the contract. Everyone’s policy is different due to their lifestyle, job, or health. You can ask a Cigna team member to go through your contract with you whenever you have questions.
Life benefit (or cover amount): this is the amount of money that will be paid out to the beneficiary specified on your Life Insurance policy should the insured person die.
Premium: this is the monthly or annual amount of money you pay for your Life Insurance. We’ll work out your premium when we’re doing your underwriting process (see below), needs analysis and risk assessment for your policy. If you’re a risk to the insurance company, your premium will be higher (because, say, you have a pre-existing medical condition).
Underwriting: this is the process an insurance company goes through to determine the risk for them to insure you. This means accessing and evaluating your medical records, career, age and other factors.
Policy owner: this is the person who takes out the policy. Remember, it’s not the same as the insured person - you could take out a policy for your spouse, but that doesn’t make them the policy owner. They’re the insured person in this situation.
Insured person: this is the person whose life the policy insures. This is different to the policy owner (see above). The insured person cannot legally change the beneficiary of the policy, so it’s very important they have an up to date Will to outline these specifics.
Policy provider: Cigna is the policy provider. It’s stated right up front on your contract to make it really clear!
Pre-existing condition: this is a medical condition that the insured person has before they get their life insurance policy.
Dependent Child: a person under 20 years of age who is your child, the child of your spouse or partner, or who is financially dependent on you. This also includes adopted and foster children.
Duty of Good Faith: this is a duty you have when signing your policy contract to supply us with honest, accurate information. This disclosure is critical for the full payout of your claim.
Changing my Life Insurance policy
It’s a smart idea to change your policy if something “big” happens in your life - like if you get married, have a child, or buy a house. We’re going to talk more about when you do and don’t need Life Insurance below. Life Insurance isn’t a set and forget product, and your level of cover will probably change as the years go by. Just like life!
Cigna offers Term Insurance - this insurance provides protection for a specified period of time (most commonly a year). Your premium rate will stay the same for this period. At the end of each term, your premium will automatically review. Unless you change the insured sum, your premiums will stay the same. However to account for inflation, we add an indexation increase, as well as any necessary risk adjustments based on your age.
If you continually renew your policy, you’ll see the premiums stay the same - even if your health changes. If you want to know more, you can contact an insurance advisor at Cigna - or check out our blog on calculating insurance cover costs.
Cancelling Life Insurance
If you decide you don’t need cover anymore, you can cancel all Life Insurance. Our team at Cigna will make sure you’re not paying if you’re not covered - you just need to give us 30 days notice if you want to cancel your policy.
One thing to keep in mind - should your health change after you cancel a policy, you might have problems trying to get the same cover back. It’s best to check with us to find out exactly what might change if you cancel your cover and want to get it back down the track.
Does Cigna ever not pay out Life Insurance?
One of the most important things about Life Insurance is telling the truth when you get a policy from us. Remember the duty of good faith from the glossary section? We need to know everything about life situation, job, health and family to make sure you’ve got the right cover for you.
Of the 3824 life claim payments we made last year - that’s $9.8m of Life Insurance for New Zealanders - we had to decline just 3% of life claims.
If you haven’t told the truth on your application, there may be occasions where we do not complete an insurance payout. If your claim is denied, but you’ve made all reasonable efforts to let us know all of your information, there are sometimes situations where we can come to an arrangement and complete your claim, but with a payout that’s lower than your insured sum.
Am I the right age for Life Insurance?
We get lots of questions from people wondering if they are too old or young for Life Insurance. Cigna makes sure that you have the right Life Insurance policy for your stage in life, not your age. For example, Cigna no longer sells Funeral Cover to people we see as too young (55 years and under). If Life Insurance isn’t right for you, we can explore other options - whether that’s medical insurance, income protection, or nothing at all!
We want to make sure the right people have the right products for their stage in life - because age is just a number, right? Many of us have friends who had kids young, or got married when they were older. It’s these moments that make us stop and reassess our finances, to work out if we have enough for now, or if we’ll have enough later.
When you hit a new life stage or make a big decision, it might be time to get Life Insurance. There are certain points where it’s a good idea to consider cover. These may include:
If you’re starting your career (this is especially important for young people - #adulting)
If you’re in a de facto relationship - especially if you share assets
What’s the benefit of getting Life Insurance while I’m young?
A lot of young people forget to think about insurance - let alone Life Insurance. We often find that people between 25-35 are under-insured for their life stage.
Many people don’t know that investing in Life Insurance when you’re young is a savvy choice if you’re budget conscious. If you’re in good health, your premiums will generally be lower than someone with an existing medical history. The older you are, the more likely you are to have had health problems. The older you are when you purchase your Life Insurance, the more likely your premiums are higher.
If you think you might be underinsured, get in touch with us for a conversation about Life Insurance for young people.
Am I too old for Life Insurance?
Are you wondering if you’re too old for Life Insurance? You must be between the ages of 18-70 to apply for Life Insurance, but as long as you apply before you turn 71 your cover will continue until you cancel the policy. Once you’ve got a policy in place, premiums will continue to increase annually, but cover remains.
If you want to know how much cover you should get, use our online calculator to see if your insurance is keeping up with where you’re at in life.
As you age
Inflation, indexation and risk factors associated to age will impact your premium throughout your coverage period, likely making Life Insurance more expensive as you age. This is a balancing act.
As your dependents leave home, or you pay off a chunk of your mortgage, your cover requirements will decrease. Over 50 years old, Life Insurance will continue to get more expensive, which is why it’s important to keep reviewing your cover regularly to make sure you’re still getting the most from your insurance provider.
Other insurance options
At Cigna Life Insurance means one thing: the insurance of your family and loved ones financial security in the event of your death But if you don’t think Life Insurance is right for you just yet, there’s plenty of other options.
Being ill can be taxing both emotionally and financially - Cigna’s cancer cover looks after you in the case of prolonged sickness. Alternatively, Income protection insurance could be a good option if you find yourself unable to work due to injury or illness. Be mindful though - an income protection payout will only cover you for a maximum of two years. Explore our insurance products to find the best option for you.
I’m a parent - what do I need to know about Life Insurance?
If you’re a parent, or you’re thinking about becoming a parent, it’s really important to consider Life Insurance. Raising children is a step up in life stage, so ensuring your dependents are protected, should you no longer be around, is critical.
If you’re a stay-at-home parent who doesn’t draw an income, the value of your work is difficult to quantify financially. But there’s no doubt about it - you’re contributing a significant amount of time and labour to your household.
In the event of your unfortunate death, who would fill the unpaid domestic labour gap? Activities like childcare, housekeeping, gardening, errands and cooking might need to be outsourced if you weren’t there, at significant cost to your partner or family. A Life Insurance payout can fund the outsourcing of these domestic tasks.
Children aren’t the only reason to get Life Insurance. If you have credit card debt, are paying off your mortgage, or you upgraded your car to a people mover when the kids came along, you should still take the time to look at your insurance options. If you were to die, these debts would fall to your partner or family. Life Insurance is not only a nest egg for your family - it’s an important financial safety net.
How much does it cost to raise a child?
The cost of raising a child in New Zealand depends very much on household income, but you should ask yourself what kind of future you envision for your children. Do you want to pay off the mortgage? Send them to public or private school? Fund them through university? A Life Insurance payout can provide upward mobility and a whole host of opportunities to enrich our whanau’s lives.
Once your children are adults and the empty nest syndrome has subsided, you may ask yourself if you really need to keep your Life Insurance cover.
Presuming you have a partner, your Life Insurance is an important safety net for them should you pass away. Your life insurance payout can help carry them through a stressful period as well as supplement their retirement savings (or yours, should they pass away).
Your insurance needs will change when your children leave home and no longer rely on you, but there are a number of other factors to weigh up. Consider your existing debts, other dependents (are you expecting to be a grandparent in the future?), and your retirement saving goals. Your Cigna insurance advisor can talk you through these considerations.
Life insurance and your will
A will is a legal document than ensures your assets and wishes are dealt with and carried out exactly as you specify after you’re gone.
Public Trust recommends that every adult has a will. While writing a will may feel strange, especially if you’re a young person (the Trust estimates up to 70% of young people don’t have a will), it’s essential to protect your financial legacy as well as specifying who will benefit from your Life Insurance payout. If you have children, your will sets out your intentions for their inheritance. If you are in a de facto relationship or married, your will affects your partner.
Writing a will is especially important if you have assets. Without one, your family may face a tense period trying to work out how your estate should be divided after your death. Appoint the executor of your will carefully. Carrying our executor duties carries legal liability, so you will need to choose someone who is trustworthy, well organised and an efficient communicator.
I’ve got some financial concerns about life insurance
The cost of living in NZ is high - this may leave you wondering if you can afford Life Insurance in the first place. In this section, we’ll explain how to balance Life insurance with other finances.
Life Insurance is too expensive for me
If you’re worried about getting affordable Life Insurance, or you don’t know how much cover to get, start by asking yourself how much your family and loved ones may need if you died. You can also use our online calculator. Your insurance premium will vary significantly depending on how much cover you think you need, your health history, and other special features you may decide to opt for with Cigna.
Your Life Insurance policy is a contract that automatically renews annually - to cover you for the ensuing period. The cost of your cover will depend on your age, health, whether you smoke, and your family medical history. Any changes to your health after your policy begins is covered with no additional cost. But, if you cancel, a new policy will assess your current health. Be aware that this might change the premium or affect your ability to get insurance.
Life insurance will get more expensive as you age. As you get older, the chances of passing away increases, and therefore so will your premium. It could be a good idea to set a calendar reminder to review your premium periodically, to make sure it’s still serving your needs. If you would like to talk to a Cigna team member at any stage, you can call us on 0800 900 047.
On the flipside, if you pass away your Life Insurance policy can be used to cover a whole bunch of costs. In the days after your death it can cover the costs of your funeral. It can also be used to assist your spouse, child(ren) and other dependents through financial difficulties.
It’s times like these when the importance of budgeting in Life Insurance becomes helpful. Accommodating premium costs can feel like just another thing on your plate, but it’s an important element of the family budget if you’ve got dependents. If you don’t have dependents, you could consider structuring your will to benefit your favourite organisation or scholarship program.
I’m not a breadwinner, do I need Life Insurance?
Much like the stay-at-home scenario we covered earlier, your contribution to the household’s finances would be noticeable in the event of your death.
If you’re a homemaker, or your partner is the higher earner in the relationship, remember that replacing the services formerly provided by a deceased homemaker will cost more than you think. When it comes to costs like cleaning or daycare costs, insuring against the loss of a homemaker might be a helpful way to safeguard your family’s financial future.
Is Life Insurance worth it, or should I build wealth another way?
These discussions are always helpful to have with your financial advisor or wealth management consultant, but if you’re tossing up between savings vs Life Insurance, or investing vs Life Insurance, it might help to think of Life Insurance as a backstop, in the event of premature death. Do you really want to risk it?
Some people will be better off saving or investing. This is advice you should seek from a trusted financial advisor. If you have a savings account that can cover any debts or dependents, then you might not require Life Insurance - but revisit your needs and life circumstances regularly to make sure you’re still being smart with your money.
You may want to take a combined approach to your risk management and take out a Life Insurance policy, in addition to a savings account you regularly pay into. This way, rather than relying on savings or investments you can diversify where you’re keeping your money - minimising risk and making sure you have enough money to get through any scenario.
There are many services to help you make these decisions. In addition to Cigna Insurance advisors, you can try Googling financial advisors in your area to start the process. They’ll give you a good idea of what to think about as you move through different life stages. If you’re an investor, wealth management or investment management firms are a good place to seek professional advice.
Financial planning can seem like just another thing to worry about, but it’s critical to make sure you’re on top of your finances - whether you’re after Life Insurance or wanting to explore investment options.
How healthy do I need to be to get Life Insurance?
During your Life Insurance application, we’ll ask you a series of questions about your medical records and family history.
There is no medical exam as part of this application. You just have to honour full disclosure and your duty of good faith with us, and make sure you’re totally honest about the details you’re providing on your application.
Applying for Life Insurance is really easy. If you're in good health and answer the questions honestly, it is possible to be approved and have cover at the end of the application form! This means no blood tests, and no doctor’s visits.
When is a medical exam required for Life Insurance?
A medical exam is sometimes required, only in specific situations, such as:
If you have requested an unusually large amount of cover
When we need a doctor’s input to make a fair assessment. If you report a medical condition we will sometimes send a form directly to your doctor to complete, rather than having you visit your doctor for a check up or test.
Unfortunately, sometimes we are unable to provide Life Insurance. This may be because you have a particular health condition that we cannot cover. If your health disqualifies you from getting Life insurance, we offer a range of other insurance options that might be better suited. Simply contact the Cigna team and they will be able to advise based on your situation.
What is Underwriting?
Underwriting is the process by which we determine the risks involved in covering you for Life Insurance, e.g. assessing pre-existing medical conditions, which may increase premiums.
We do much of our underwriting over the phone, which eliminates awkward paperwork and ensures a quick turnaround on your cover. Once we have all of your required information, we can give you a fast answer on whether you are able to be covered by us.
A final word on Life Insurance
Getting Life Insurance is a process that can feel confusing at times, but the peace of mind and the security it offers your loved ones is priceless. Cigna is happy to help demystify Life Insurance, and point you in the right direction. If this guide left you with questions, get in touch with us. We’re here for you and your loved ones.
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