While paying for your protection benefits can seem pretty simple – the regular amount required is deducted from your bank on the due date – the reality is that there are a number of different premium structures on offer and if you are not aware of how your particular premium structure works then there may be some surprises for you in the future.
Lets look at the most common premium structure known as YEARLY RENEWABLE TERM or RATE FOR AGE.
This structure often represents the cheapest premium option in the first year.
The structure allows for annual, age related increases in premium so you pay an increasing price each year in conjunction with the life assured’s increasing age.
The structure also allows the company to pass on any increases or decreases in the underlying rates for age on the next policy anniversary following the rate change. this means that the future premium illustrated to you at the time you purchased your policy were estimated based on the underlying rates that were applicable at that time and are not guaranteed. Future premiums may differ from those illustrated according to the company’s actual experience of claims and persistency.
If you select an annually reviewable premium structure, you should be expecting your premiums to increase each year on the policy anniversary date.
Many people also choose the CPI Increase option to retain the true value of their benefits.
Because the premiums are increasing, the premiums payable for the benefits you have elected to CPI index will also increase by the inflation rate. these CPI increases in benefits and premiums will take effect on every policy anniversary.
There are options and we recommend that all clients also consider a Level premium option to provide certainty in the future.
Contact Thorners to discuss the premium options available to you. We offer a New Zealand wide insurance service and applications can also be made online for Life and Health cover from the link on the Thorner website.