Life Insurance Tax Changes
New tax legislation will take effect on 01 July 2010 and will change the way life insurance is taxed. The new tax rules will mean a significant increase in the amount of tax that will be payable by life insurers on life risk business.
This will mean changes for you, the consumer, as well.
Part of the new tax rules allows for ‘grand parenting’ of policies that are currently in place over the next five years. This means that the insurance company is protected from tax changes on these policies over this period. It will be up to the individual insurer whether or not they increase premiums on these policies.
In the short to medium term it is likely that new life insurance quotes that become policies are going to cost more when they are taken out. Again, the percentage increase that individual insurance companies choose to raise their premiums by, if they raise them, is at their discretion.
Good Timing For Life Insurance Quotes
InAs a consumer there are a couple of options available to you to get in before any premium increases take effect. If you need any additional cover now is a good time to get a quote and apply for it. As long as the cover is in place before 01 July 2010 it will be protected under ‘grand parenting’ for the next five years.
An even more certain way to protect yourself from increasing premiums, as well as providing certain and predicable costs for your insurances over time, is to ‘lock in’ your policy using a level to age 65 or level to age 80 policy. By ‘locking in’ your policy in this way your premium is guaranteed until you reach age 65 or age 80 – whichever you choose. You will initially pay more for your cover but the premium amount will not change and over time the savings will be extremely significant.
A key benefit with ‘locking in’ your policy is that if you do this prior to 01 July 2010 you have a premium that is guaranteed and will therefore not be affected by the upcoming tax changes.
Our Advice
So – what to do?
If you are considering increasing your life insurance or putting cover in place now is most definitely the time to act. Life Insurance quotes are easy to organise – click below for help. It is also worthwhile considering ’locking in’ at least some of your cover to take advantage of long term premium guarantees.
We recommend a combination of ‘locked in’ and ‘rate for age’ cover (the premiums on rate for age increase as you get older) as this allows you to manage your short term needs – with rate for age cover, and your long term needs – with level cover.
If you’re not sure what’s best for you and your circumstances, click below to get a range of life insurance quotes from the main New Zealand life insurance companies.
