Permanent Disablement Cover in New Zealand Life Insurance Policies
Typically, New Zealand life insurance plans do not vary a great deal between life insurers. There will be some differences – for example one New Zealand life insurance plan might have ancillary benefits that another does not (a financial planning grant for example), or might offer very slightly different benefits (for example one life insurer might offer an advance funeral benefit of $10,000 while another might offer $15,000) – however the basic structure of New Zealand life insurance policies tends to be very similar. They share the same foundation – life insurance policies will pay out on death or terminal illness – and so any differences tend to be relatively minor.
However one area where there can be significant differences between New Zealand life insurance policies is in the type of optional add-ons that you can choose to add to your New Zealand life insurance plan. Common examples are things like Waiver of Premium (if added to your life insurance NZ policy, this means that your insurer will pay your premiums for you if you are ill or injured and can’t work), or trauma insurance (which will pay a lump sum, usually an advance payment of your life insurance NZ, if you suffer a trauma condition, like heart attack or major cancer etc). We will take a look at another option which can usually be added to New Zealand life insurance policies – total and permanent disablement insurance.
First, the structure of a total and permanent disablement insurance plan is similar to life insurance NZ in that when you set up the policy, you choose a lump sum to insure. This lump sum is paid in the event that you need to claim – that you become totally and permanently disabled.
The difference is that, while life insurance policies are designed to pay if you pass away or are terminally ill, total and permanent disablement insurance will pay if you are still alive, but because of some health event are never able to work again.
When considering adding total and permanent disablement to your life insurance there are some important considerations. First, it is important to check how the life insurance NZ company defines “total and permanent disablement.” Typically insurance companies will offer two options – “own occupation” total and permanent disablement insurance and “any occupation” total and permanent disablement insurance. The difference is that to qualify for a claim under the first option, the insurer will consider whether you are able to perform your actual, usual job. However with the second option, the insurer will consider whether you are able to perform any occupation that you could reasonably be expected to perform. It is much more difficult to “qualify” for a payment under the second type of total and permanent disablement insurance – so this is important to check.
In a similar way, it’s important to check the actual wording the insurer uses in their definition of “total and permanent disablement“, as this can vary with some definitions being less “client-friendly” than others.
A third consideration is that usually the total and permanent disablement insurance lump sum will be an early payment of your New Zealand life insurance. For example if you had a life insurance NZ lump sum of $500,000 and a total and permanent disablement insurance lump sum of $200,000 and made a claim under the total and permanent disablement part of the policy, you would receive $200,000 and your New Zealand life insurance would reduce to $300,000. You can also choose to have a policy that would not affect your life insurance policies(at a slightly higher cost). Which is best and will depend on your situation, and this is important to confirm which you want before your policy starts.
Total and Permanent Disablement Cover is truly beneficial and should be included in your New Zealand life insurance. Before including it check how the life insurance company defines “Total and Permanent Disablement.” With this feature lump sum is paid in the event that you become totally and permanently disabled. Always buy life insurance NZ policies including Permanent Disablement Cover.
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