Life insurance policies are quite simple – a standard policy will pay the chosen lump sum in the event that the insured person passes away or is terminally ill. Usually there are other options that can be added to a life insurance policies (for example so that the insured sum would be paid out in the event of major illness, rather than just death or terminal illness), however the basic design of life insurance policies tend to be very similar across insurers.
However life insurance NZ plans can have some minor variations. Mostly these variations will be in the form of which additional built-in benefits the plan offers. Examples of these types of benefits are a special events increase option (which allows you to increase your life insurance sum in the event that you experience certain life events – like having a child or buying a house) or a bereavement support benefit (which is an early payment made by the insurer to help with funeral or other final costs. Most insurers offer this, however the size of the early payment can vary). Another common built-in benefit that life insurance NZ plans offer is a financial advice benefit. We will take a look at how this works below.
The concept behind a financial advice benefit is quite straightforward. If a life insurance claim needs to be made, the sum paid out by the life insurance company will often be relatively large. For many people the life insurance sum will be the largest amount of money that they have ever received – and deciding how to use the sum can be difficult. For example, depending on their situation, the recipient of the money might need to decide whether to pay off a mortgage, or save for retirement, or pay for a child’s education.
In this type of situation, receiving advice on the best use of the New Zealand life insurance sum can be important. For this reason the recipient will often decide to use a Financial Adviser to assist in evaluating the different options available and choosing which to pursue. Also, in many cases the use of the New Zealand life insurance sum can require the advice of a lawyer.
To assist with costs like hiring a Financial Adviser or lawyer to provide advice, many life insurance companies will offer a financial advice benefit. This will be an additional sum (so it is paid on top of the insured life insurance amount), commonly of around $1,500 to $2,500. The insurer will reimburse the life insurance recipient an amount up to this limit to pay for costs incurred with accessing financial or legal advice.
There are usually limits on claiming under a financial advice benefit. For example the claim for costs will usually need to be made within a certain period of time following the payment of the New Zealand life insurance policies lump sum. Also any advice that you do receive needs to be regarding the use of the life insurance NZ sum paid to you by the insurance company (rather than general information for example). However even with these types of conditions, a financial advice benefit is very simple to access and can be a very useful addition to a life insurance NZ policy. So, while you would probably not choose a life insurance policy simply because it has this type of provision on it, if you are comparing two policies that are the same in other regards (for example financial stability, cost, etc) and one life insurance NZ plan offers this type of benefit while the other does not, then this could be the kind of benefit that makes you choose one New Zealand life insurance plan over another.
To assist with costs like hiring a financial adviser or lawyer to provide advice, many life insurance policies will offer a financial advice benefit. Financial advice benefit helps in deciding the right thing to do with the sum paid by New Zealand life insurance company.