Welcome to the Spring edition of yourSHARE
What you need to know about Level Term insurance!
You may already know that life insurance products are priced on the age of the insured person, with premiums rising annually as you get older. This is called Yearly Renewable Term cover. The older you get, the higher those premiums rise – and so people often feel forced to reduce or cancel their valued cover to keep their premiums within an affordable range.
But did you know that Level Term insurance gives you the option of retaining that valued cover for longer? Level Term allows you to “lock in” level premium guarantees, which have the effect of levelling out the cost of your insurance over the expected life of the policy. While it does increase the cost in the early years, it can also save a considerable amount in the latter years of the policy. Another thing to remember is the younger you are when you lock the premiums in (and also the longer the life of the policy), the more cost effective it can be.
For example, consider a 36-year-old non-smoking male, wanting to discuss the potential savings he could make taking out both Life and Trauma covers for a thirty-year term. His first annual premium for a Yearly Renewable Term policy would be $351.72 with Fidelity Life. Compared to a first annual premium for a Level Term policy of $938.04, the choice may seem clear cut. However, fast forward thirty years later to age 66 and there’s a good chance he will be looking to retire.
His annual Level Term premium is still $938.04 – whereas his annual Yearly Renewable Term premium has increased to $5,196.60.
Or to look at it another way, because Level Term has an agreed fixed premium for the life of the policy, the average premium over the life of the contract is much cheaper – in this case his average premium for Level Term would be $78.17 per month versus $136.57 per month for Yearly Renewable Term. It often means that under Level Term, clients are able to keep the insurance covers in place for longer due to the premiums remaining affordable.
In New Zealand today, we often need insurance for a lot longer than previous generations. It is quite common today for a 65-year-old to still have children at university, or for people to still be working well into their seventies. Many people still carry high debt levels at what used to be a retirement age, and so are reliant on one or two incomes for longer.
Many clients are grateful for the opportunity to lock in premium guarantees, giving them the much needed security for longer than their budget would allow on the traditional stepped premium structure. It costs nothing to speak to your SHARE adviser to go through the options of level premium guarantees, but the end result could be of great value to you.
Adapted from Fidelity Life - did you know: the benefits of Level Term insurance.
A word from us...
And just like that, Spring is upon us! We can’t believe how quickly 2016 is flying by, and we hope you are making the most of it! With the end of the year ever so closer, now is an important time to look back and double check you have been achieving your goals you set at the beginning of the year. If not, it may be time to reassess those goals, sit down with a pen and a cup of tea and decide how you can make the next three months some of the best yet. Whether it be personal goals or business goals, break them down into simple steps and tick them off your checklist as each day goes by.
With the weather warming up again (hurrah!) take the time to catch up with family and friends – perhaps it’s time to put the BBQ on again, and start enjoying the great outdoors already!
We have had an exciting 2016 so far at SHARE, with a number of new advisers having joined the SHARE family from various parts of New Zealand. As I am writing this, the SHARE annual conference is just around the corner - being the 1st and 2nd of September! We are looking forward to finishing off the year.
From the team at SHARE!
First home buyer tip: stay within your means
If you are a typical first home buyer, your mortgage is a burden you’ll bear for many years to come. Owning a home is a big commitment and you need to approach borrowing with a healthy dose of caution.
While your lender may give you a maximum home loan amount, the payments could be higher than your comfort level. Listen to that inner voice of caution: it’s important that you assess your own borrowing capacity for your first home before you buy.
Here are some factors to take into account when determining how much you should borrow – rather than how much you could borrow.
HOW MUCH DEBT CAN I HANDLE:
A rough guide a manageable mortgage payment is your current rent plus any amount you regularly save. Decide if you can increase the amount available for the mortgage by giving up some aspects of your lifestyle, such as frequent travel, dining out or expensive car loans.
AM I BEING REALISTIC?
Houses are like stepping stones – it’s usually best to start with something modest and move towards a larger or better located home as your personal earning capacity and equity grows. Aim to purchase a house you can afford, rather than the proverbial dream home.
ARE MY PLANS LIKELY TO CHANGE IN THE NEAR FUTURE?
Think about what the futures holds – both personally and financially. Do you have one or two incomes in your household, and is this likely to change in the future if you start or increase your family size?
WHAT IF INTEREST RATES GO UP?
Consider how a mortgage interest rate rise will affect your ability to make repayments and factor that in when setting your borrowing limits. Currently rates are at historic lows, but in a few ears they could be higher.
Talk to you SHARE adviser today to see how we can help!
Adapted from mortgagesupply.co.nz – stay within your means
A disclosure statement is available upon request, free of charge.