What Life Cover Is Designed To Pay For
Life cover is there to meet the financial gap your death would leave. That gap is different for every household, so we start with the costs and responsibilities that would remain.
The payment could be used to:
- Clear or reduce the mortgage and other debts
- Replace part of the income your household would lose
- Pay for childcare, home help or time away from work
- Support children through school or tertiary study
- Meet funeral, legal and other immediate costs
How We Work Out Your Life Cover Amount
We do not begin with a blanket multiple of your salary. We add up what your family would need, decide how long that need is likely to last, then subtract savings and existing cover that would be available.
A useful starting calculation is:
- Mortgage and other debts you want cleared
- Income your family would need, multiplied by the number of years it is needed
- Childcare, education, funeral and other future costs
- Less savings, investments and existing life cover that can be used for these purposes
We would also test how the need changes as the mortgage reduces and children become independent. The final amount should provide useful protection at a premium the household can maintain.
Stepped And Level Life Insurance Premiums
We compare the projected cost over the years you expect to hold the cover, rather than choosing from the first premium alone.
With stepped premiums, sometimes called age rated premiums, the starting cost is usually lower and generally increases as you get older. This can suit cover that is expected to reduce or finish sooner, but we also show you what the premium may look like later.
Level premiums usually start higher. Depending on the policy, the cost linked to your age is held level for a chosen period. The total payment can still change if the cover rises with inflation, a policy fee changes or the insurer changes an underlying rate where the policy permits it.
Where available, part of the cover can be level and part stepped when the mortgage and family income needs finish at different times.
Who Controls The Policy And Receives The Payment?
That depends on how the policy is owned.
The person whose life is insured and the person who owns the policy do not have to be the same. Ownership affects who controls the policy, who can change it and how a claim is paid, so it should be decided deliberately.
We ask who the money is intended to support and how quickly it may be needed. If a trust, business, will or relationship property arrangement is involved, Nik can explain the insurance paperwork and work alongside your lawyer. We refer legal ownership and estate planning questions to a lawyer.
Life Cover And Your Wider Insurance Plan
Your mortgage, insurance and investments are all part of your financial plan. While Sarah helps you secure the right mortgage, Nik helps protect the life built around it and plan for what comes next.
Life cover responds when the insured person dies or meets the policy definition of terminal illness. Our personal insurance advice also considers risks that can affect the household while you are alive.
Income protection insurance can provide regular payments if illness or injury stops you working. Mortgage protection insurance is designed around meeting loan repayments when you cannot work. Trauma and TPD cover can pay a lump sum after a covered serious condition or qualifying permanent disability.
These covers answer different financial problems. We show what each one would pay and where there is an overlap, so you can decide which risks need cover.
What Nik Reviews Before Recommending A Policy
Nik has over 15 years in financial services and is based on Auckland's North Shore. His recommendation starts with your financial position and the people who rely on you.
He will review:
- Your mortgage, other debts and household costs
- Both partners' incomes and how long dependants may need support
- The cost of replacing unpaid childcare and household work
- Savings, employer benefits and existing insurance
- Policy ownership, cover amount and premium structure
- Definitions, exclusions, expiry ages and underwriting requirements
If you already have life insurance, we read the existing policy before recommending a change. A lower new premium can come with different definitions, exclusions or underwriting terms. Existing cover should stay in place until the new policy has been accepted, you have read the offer and you are ready for the replacement to proceed.
Applying For Life Cover
First, we work out the financial gap and agree what the cover needs to do. Nik then compares suitable policy options, premiums and wording within the scope of his advice.
The application asks about your health, family history, occupation, smoking, travel and higher risk activities. The insurer may request medical records, blood tests or other information. Complete and accurate answers matter because they affect the terms offered and may be checked during a future claim.
The insurer may accept the application on standard terms, offer cover with a higher premium or an exclusion, defer a decision, or decline the application. Nik will explain the offer, including any terms that differ from the application, before you decide whether to accept it.
Once the policy is issued, we check the schedule and confirm when cover starts. We review it when your mortgage, income, family or business responsibilities change.
How Does Nik Work Through Your Insurance Advice?
Insurance advice should start with your needs, goals, responsibilities, and financial position, not with a product.
Nik works through what matters most, what could create serious financial pressure, and what options may help manage those risks.
Understand Your Situation
We look at:
Clarify What Matters Most
We talk through what you would want protected if something went wrong. This may include:
Identify The Main Risks
We look at the events that could create the biggest financial impact. This may include:
Consider The Options
Before looking at insurance, we consider what else may already be available. This may include:
Insurance is only one part of the discussion.
Compare And Structure The Cover
If insurance is appropriate, we compare available options and explain how they work. This may include:
The focus is matching the structure to your needs, goals, and budget.
Apply, Review And Support At Claim Time
If you decide to apply, Nik helps prepare the application and supporting information. Nothing is submitted to an insurer without your approval.
Once cover is in place, it should be reviewed when life changes. If you need to claim, Nik can help you understand the claim process and what information may be required. The insurer still assesses the claim under the policy wording.
How Much Life Cover Do I Need?
There is no single amount that suits every household. Add the debts you want cleared, the income your family would need for a chosen period, childcare and future costs, then subtract savings and existing cover that would be available. We calculate each item with you and test the premium before recommending a sum insured.
Does Life Cover Automatically Pay Off My Mortgage?
Not by default. Life cover pays the insured benefit under the policy's claim and ownership arrangements. It does not automatically send your mortgage balance to the bank unless the policy has been assigned or structured to do that. If clearing the home loan is the priority, we include the loan balance in the calculation and check that the ownership and payment arrangements support that purpose.
Should Both Partners Have Life Cover?
Often, yes, if the death of either partner would create a financial cost for the household. A partner who earns less or is not in paid work may still provide childcare, transport and household support that would be expensive to replace. We calculate the financial effect of each death separately rather than giving both partners the same amount without checking.
Can I Get Life Cover With A Pre-Existing Condition?
Yes, it may still be possible. The insurer will assess the condition, treatment, current health and other risk factors. It may offer standard terms, charge a higher premium, exclude claims connected with a condition, defer its decision or decline the application. Where an insurer offers pre-assessment, Nik can seek an early indication of likely terms, but the insurer makes the final decision after reviewing the full application.
Should I Choose Stepped Or Level Premiums?
Choose based on how long you expect to keep the cover and what the future payments may look like. Stepped premiums usually cost less at the start and rise with age, while level premiums generally start higher and hold the age related cost level for a set period. We compare both over the intended life of the cover because the cheapest first year may not be the lower cost option over ten or twenty years.
Does Life Cover Include Terminal Illness?
Many life cover policies allow an early payment if the insured person meets the policy's definition of terminal illness. The required medical prognosis and evidence differ between policies. An early payment usually reduces or uses the life cover amount that would otherwise be paid on death, so we check the exact wording before recommending a policy.
How Much Does Life Cover Cost?
There is no standard premium because life cover is individually priced. The main factors are your age, cover amount, smoking status, health, occupation, higher risk activities, premium type and optional benefits. We compare like with like and show how the cost may change over time before you decide.
Talk To Nik About Life Cover
Bring your current mortgage balance, other debts, household income, existing policy schedules and an idea of who you want the cover to support. Nik will help you work out the amount, compare the available structures and explain what the insurer needs from you.
Your first conversation with Nik is free. Before providing personalised advice, he will explain the scope, any fee, how he is paid and any payment The Mortgage Advisers may receive if you act on his recommendation. You can decide whether to continue after receiving those details.