Life Insurance - Tax Changes Coming

I've talked previously about the fact that life insurance increases as we get older see http://www.vbiznz.co.nz/profiles/blogs/is-it-time-to-have-a-fixed , and there was an article in Monday's NZ Herald talking about a potential 25% increase in premiums - see http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&obje...

Life insurance does not currently have a GST component on it, and this is what the Government have worked to fix. As of 1st July 2010 this will change. This change will have a dramatic effect on Term Life Cover in that in the long term premiums will increase. The insurers will not be able to absorb this cost, and will have to pass some, if not all, of it to the customer.

So, is there a way to take advantage of this? The answer is yes, there most certainly is.

I've already established that by paying a slightly higher premium today, you can "fix" your life insurance premiums for life and in so doing avoid the tax implications and any rises you would normally have as you get older. This not only saves you the tax, but actually saves you a considerable amount over the term of the insurance.

Let's look at this in more detail. A standard mortgage term in NZ is 30 years, so lets look at how much $300,000 of cover on the standard rate for age, and the level premium for a 35 year old male, non-smoker would be.

On Rate For Age* the starting premium would be $20.88, but the average monthly premium over the whoole 30 years would be $95.62. Which means you'd pay the insurer $34,423.20 in total.

On Level Premium* the premium each month for 30 years would be $47.34. So in total you'd pay $17,042.40. So you actually make a 50% saving!!

What do you need to do to take advantage of these savings?

EMail us at enquiries@insurancemarketnz.co.nz or call 09 476 1444

*Please note, these premiums are from Fidelity Life and are subject to change based on the applicants health status.