LIFE INSURANCE TAX CHANGES

From 1 July 2010 we will all have to pay extra for our life insurance, as the Government’s latest tax changes makes life insurance companies pay the same rate of corporation taxes as other industries. The life insurance companies have been taxed at a lower rate since 1990 and, due to the highly competitive nature of New Zealand’s insurance market, those tax savings have been gradually passed on to customers as reduced premiums by the companies attempting to get a better market position, so that at present the life insurance companies do not retain much, if any, of the lower tax benefits themselves.

Consequently the removal of the insurance companies tax subsidy will directly result in them all increasing our life insurance premiums. There will be no avoiding a premium increase as the whole insurance industry is impacted by the tax change, but again due to the competitive nature of the insurance market, there could be significant differences in the premium increases between some companies. The premium increases have ranged between 15% and 30%, so obviously some insurance companies have been able to absorb more of the increased tax cost than others and/or some companies are plainly being greedy.

The life insurance company that you have your insurances placed with now, who may have been the best deal previously, may not necessarily be your most cost effective insurance provider going forward.

What you can do?

Contact your Advice Financial adviser and arrange a review of your insurances OR call toll-free on 0800 10 22 64 to find a local adviser and make an appointment to meet with them OR e-mail action@advicefinancial.co.nz

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