Life Insurance Premiums are going up - act now to avoid the increase

As of 1st July 2010, changes to the way Government taxes term life insurance products will be implemented and all insurers have indicated an increase of between 15-20% on life insurance policies. 

Article from NZ Herald 15th February 2010 click for further information 

So what does this mean to me

• Level Premium life insurance policies will be exempt of the tax increase *
• Existing Stepped Life Insurance premiums will go up from 1st July 2010**
• Any new Life Insurance policy or increase in Life Insurance policy after 1st July 2010 will be subject to the full increase in premums

* As long as the insurance company wording mentions this** These will progressively increase over a 5 year period   *** This only applies to Life Insurance all other insurance polices are exempt

Can I avoid the tax increase

1. Yes you can you need to speak to us TODAY about making your Life Insurance premiums level
2. Making your Life Insurance premiums level means you avoid the tax change increase in premiums

Do I need to change my Life Insurance policy

• If you wish to keep your current Life Insurance policy longer than 5 years then you should consider it
• If you only want to keep your current Life Insurance policy for less than 5 years then it is probably not worth changing

So what to do next

• If you intend to keep your current life insurance cover for 6 years or more we do recommend getting a quote done  to see how the changes will affect you and what money you could save
• Dont delay as you need to act before 1st July 2010, once that date passes you will not be able to take advantage of this situation to the same extent
• The good news is that to make the necessary changes to all of the above, there are no underwriting requirements so it is a fairly simple process

Stepped and Level Premiums - the Difference

• Stepped Premiums or rate for age and go up each year as you get older
• Level Premiums remain constant and do not go up as you get older  (excluding inflation)

Example of the potential increase

Client Dave

• Dave a 47 year old man has a $500,000 Life Insurance policy which has stepped premiums currently he is paying $73 per month
• In 10 years time based on current premiums he will be paying $207 per month
• Assuming the Tax Law increase is 20% then his premiums will be $248 per month
• If Dave changed his policy to Level Premiums his monthly premiums would be $190 per month and the premiums on his current policy woluld exceed this amount in seven years time.
• His current premiums will triple over the next ten years without taking into account the tax increase

What should Dave do

• If  Dave needs his life cover contract for longer than the next six years, he should seriously look at converting this to a level premium contract, which are far more cost-effective in the longer term.
• A level premium contract will save him literally thousands of dollars  in premiums and his premiums will be locked-in for the life of the contract, GUARANTEED. The only increase to this will be if he chose to increase the cover with CPI each year.