Life Insurance - Essential Policy Features, What to Look For and Questions to Ask Before Buying a Policy

"Life insurance has become much more transparent in recent years. With at least six insurers offering online quotes and several online brokers touting for your business, the 'market' is competitive. And, despite the transparency around pricing, selling life insurance policies remains very lucrative for both insurers and traditional insurance brokers. 

The power is in your hands and you should never be rushed into buying a policy without full consideration. There's a lot to consider; working with a broker (and/or insurer) that you know will be there for your family should disaster strike is essential. It's absolutely critical to understand your policy in detail - to do this, you'll likely need to ask questions and receive clear answers. There's no such thing as a silly question when it comes to life insurance and a detailed discussion is all part of the sales process.

Nothing in life is guaranteed other than death and, all going well, the full payout of a life insurance policy. We've put together this guide to help you make an informed choice. The good news is that New Zealand is highly regulated and the insurers in operation are financially secure. That being said, each policy varies and what suits one family may be too limited for another. Whatever you decide on, please remember that you need to be happy with the policy, specifically its ongoing costs and inclusions".

A life insurance policy is only as good as the company that backs it. When you buy a life insurance policy, you will likely have it in place for many years to come, so you want to make sure the insurance company you choose to buy your policy from is financially stable and will be around when and if a claim is filed on your behalf.
 
A.M. Best, Fitch, and Moody's are three independent agencies that rate the financial strength of New Zealand (and overseas) insurance companies. While these reports can be very insightful regarding the insurance company's financial strength and stability, they are considered an opinion. The ratings of the same insurance company can differ among rating agencies because they each have their own proprietary rating methodology. Each rating service uses an alphabetical rating scale, but an A+ from one rating agency may not have the same meaning as an A+ from another.

The agencies often disagree on ratings, so you should consider a company's rating from two or more agencies before judging whether to buy or keep a policy from that company. The rating scales of each of the major financial rating agencies are listed below. These ratings can be confusing, so it is important to talk with a life insurance professional who can help you decipher what the ratings mean before selecting an insurance company to buy life insurance from.

As a background, we've listed the current financial strength ratings from popular insurers (and a table underneath to understand where these ratings are placed on each agency's scale). The data is sourced from the Reserve Bank of New Zealand.