Worth talking to specialists over cover, writes SHELLEY HANNA
Worth talking to specialists over cover, writes SHELLEY HANNA
Have a look at the online calculator and see how much more you can save if, for example, you contribute 4 per cent or 8 per cent of your salary.
QI took out term life insurance years ago — I can’t remember why. It was probably when I bought my house but my mortgage is now paid off. The premiums are going up every year and I’m now paying over $200 per month. I am wondering whether it would be better if I was paying this money into my KiwiSaver account? I earn $70k pa and have $51,000 in my KiwiSaver. I am 53, unmarried with no children. I am reluctant to cancel the life policy as I have been paying for it for so long and got nothing back.
Alife insurance cover only pays out on death. No matter if you have had the cover for one year or 20, your premiums have been spent and you won’t get that money back. It is good to review your personal insurance every year and cut back or increase your cover as your situation changes. Before you cancel your term life insurance, you should run through your options with an insurance specialist. While you may not need life insurance, it may be useful for you to have medical insurance, trauma cover and/or income protection insurance. An insurance specialist will be able to assess your capacity to cope should you become ill and be unable to work. Medical insurance is useful for avoiding hospital waiting lists and may help in getting back on your feet and back to work more quickly. Trauma cover pays out a lump sum should you be diagnosed with a serious illness or condition, while income protection will pay you a regular income if you are unable to work due to illness. As with any personal insurance, you need to weigh up the risks, the cost and your ability to cover some risks yourself through your savings. Be careful about cancelling term life insurance if there is a chance you may need it again in the future. As we get older the cost of life insurance increases and we have more health issues or ‘pre-existing conditions’ that we need to disclose to insurers. A fit and healthy 30-year-old will have no trouble getting life insurance at a low cost while a 50-year-old who has certain health issues (such as depression or high blood pressure) will find it harder. If you decide to cancel your term life cover and redirect your money into your KiwiSaver, this will certainly provide you with a more comfortable retirement. Currently at age 53, according to the ‘KiwiSaver Savings Calculator’ on the Sorted website, your $51,000 will grow to $159,656 over the next 12 years with 3 per cent contributions. If you top up your account by an extra $200 per month between now and age 65 you will have around $200,029 (note these figures are not inflation adjusted). Have a look at the online calculator and see how much more you can save if, for example, you contribute 4 per cent or 8 per cent of your salary. Do you have a current will? You have a mortgage free house and savings. While you don’t have a spouse or dependents to consider, you can support other family members by leaving them a share of your estate. Their needs may change, so you may want to review your will every 10 years or so. Dying without a will is expensive, and your assets will cashed up and the proceeds divided among your living relatives according to Section 77 of the Administration Act 1969.