This page answers a wide range of questions about Continuation Options.
What is a continuation option?
A continuation option is a right which an employee can exercise under a workplace insurance plan to continue his or her insurance cover after leaving service. The continuation option enables the employee to continue cover by taking out an individual insurance policy with the plan’s insurer on favourable terms, subject to provisions which are set out in the workplace insurance policy.
Why would I want a continuation option?
If you are insured under your employer’s workplace insurance plan, and you are either leaving service or you have left service within the last 45 days, you would want a continuation option for the valuable benefits which it provides. A continuation option enables you to continue your cover in the form of an individual insurance policy with the plan’s insurer, without undergoing any medical examinations or tests, or answering any health questions. This means that you could continue to be covered for any pre-existing medical conditions, and any medical conditions which you have developed since starting with your employer. See our Continuation Optionspage for details.
How do continuation options work?
Continuation options are provided as a special concession when insuring groups of individuals. If the numbers in a group are sufficient, then normal health assessments can be waived for people when they join the group when first eligible to do so, on the basis that the group approximates the population at large. This principle can be extended when people leave the group, so that cover can be continued without any assessment of health. Continuation options work to prevent your cover from ceasing just because your employment changes.
When can I get a continuation option?
If you are covered under a Sovereign workplace insurance plan, you can apply for a continuation option within 45 days of leaving service, provided that you have not attained age 65 or reached the Benefit Expiry Date specified in the workplace insurance policy. The Benefit Expiry Date is usually (although not necessarily) the date on which you attain age 65. Other conditions must also be met (as specified in the workplace insurance policy), including that no benefit has been paid or could be claimed for you under the policy, that your new occupation is one which Sovereign usually insures under an individual policy, and that you are not living outside New Zealand after your plan membership has terminated.
Who can I ask about continuation options?
You can ask us about continuation options. We can answer any questions you have, and advise you of the type and amount of cover you can apply for under a continuation option. We can also provide you with a quote for your continuation option, and advise you of the amount of the you would receive on your first year’s life insurance premiums. We can also explain the benefits of the worldwide Best Doctors® program, which will be paid for you for a period of 1 year when you exercise your continuation option.
Where do I apply for my continuation option?
You apply for your continuation option online, right here on the KiwiCover website. Firstly, you request a quote for your continuation option by providing basic details about yourself and the employer you have left or are about to leave. We then obtain details of your cover under your workplace plan, and prepare a quote which we email to you. The email will including a link to an online application form which is pre-filled with your details. All you need do is to complete a few remaining fields, sign the application (electronically) and click on ‘Submit’. That’s all there is to it.
Does my continuation option have an expiry date?
Yes it does. Any continuation option you have will expire 45 days after the date on which you ceased employment with your employer. The date on which you ceased employment can be the date on which you actually stopped working, or a later date if you were on paid or unpaid leave immediately prior to your cessation of employment. However, if you left service as a result of sickness or accident, and conditions specified in the workplace insurance policy are met, cover under the workplace policy can be extended by Sovereign for up to 6 months after you leave service, and a continuation option can be made available to you at the end of that period.
Am I still covered while I am thinking about it?
If you are eligible to exercise (but have not yet exercised) a continuation option, and the 45 day exercise period has not expired, you are still covered under your workplace insurance policy. This is subject to the proviso that Sovereign is notified within 30 days of the date (as applicable) of your death, your sickness or accident, your total disability, or your critical condition, and provided that no policy or member-specific exclusion would have applied if the relevant event had occurred to you while you were a member under the policy. In the case of disability income protection benefits, the maximum benefit payment period following expiry of the applicable waiting period is 12 months, and all cover will cease on commencing employment with another employer. In all cases the usual claims processes and requirements must be satisfied before any benefit becomes payable.
Do I have to apply for the full option amount?
No you don’t. You can apply for any amount of cover up to the amount you had when you left your workplace insurance plan. For example, if you had $600,000 in life insurance cover when you left your workplace plan, you could decide to exercise your continuation option for just $400,000 in life cover. However, most people do in fact exercise their continuation options for the full amount of cover which they have already enjoyed. They can then decide to progressively reduce their cover (and their premiums) over time as and when their assets increase and/or their borrowings decline. Our life insurance calculator is a valuable tool you can refer back to often for this.
Can I apply for more than my option amount?
Yes you can. If you feel that you need a higher level of cover than your continuation option will provide, you can simply apply for the extra cover you need. In that event you would apply online for the amount of cover provided by your continuation option under the favourable continuation option provisions, and then apply in the usual way just for the additional amount of cover you are seeking. Continuation options often cause people to review their insurances, so it would not be unusual to find yourself applying for more cover than your option provides.
Will I have to undergo a health assessment?
No you won’t, not for any amount of cover provided by your continuation option. That is a major benefit provided by your continuation option, and it means that the individual policy which you effect cannot contain an exclusion or premium loading for any medical condition or state of health which you may have developed after you obtained cover under your workplace insurance plan, regardless of how serious that might be. What’s more, if you gained all your cover under your workplace insurance plan through that plan’s automatic acceptance provisions, then the individual policy which you effect cannot contain an exclusion or premium loading for any medical condition or state of health which you may have developed in your entire lifetime.
Will I have to undergo any other assessment?
Yes, your application will still be assessed in the normal way for non-health factors such as your residency status, any planned overseas travel and any hazardous pursuits which you may engage in (such as hang gliding or motor sports). Also, if your continuation option is for permanent disability insurance or income protection insurance, then occupational factors are also assessed.
How much will my continuation option cost me?
The premium for the individual policy which you take out when you exercise your continuation option will be calculated according to the usual factors, except health. These include the type of cover, the level of your cover, your age and your gender. You will be provided with details of your premium after you request a quote for your continuation option.
Will my premium be affected if I am a smoker?
Yes it will. As with gender, there are separate rate tables for smokers and non-smokers, covering every age from 16 to 70. Non-smoker rates are much lower than smoker rates for each age, with the reduction ranging from 20% to 60% in the case of life insurance. For example, the non-smoker life insurance rate for a 40 year old male is 56% lower than the rate for a male smoker of the same age. The good news is that if you have quit smoking for at least 12 months and you have no intention of restarting, you can complete and submit a Non-Smoker Declaration PDF and your premiums will immediately be reduced to non-smoker rates.
What if I have an exclusion under my workplace plan?
If an exclusion (specific to you) has been applied to any part of your cover under your workplace insurance plan, then that exclusion will be carried over to any corresponding cover under an individual insurance policy which you effect when exercising your continuation option. An exclusion (specific to you) would only have been applied to your cover under your workplace insurance plan if you had been assessed when joining the plan, and that would only have occurred if you had not been eligible for automatic acceptance into the plan in respect of your total prospective cover.
What if I have a premium loading under my workplace plan?
If a premium loading has been applied to any part of your cover under your workplace insurance plan, then that premium loading will be carried over to any corresponding cover under an individual insurance policy which you effect when exercising your continuation option. A premium loading would only have been applied to your cover under your workplace insurance plan if you had been assessed when joining the plan, and that would only have occurred if you had not been eligible for automatic acceptance into the plan in respect of your total prospective cover.
Will my policy be different from a regular Sovereign policy?
No, it will have all the benefits and features of a regular Sovereign policy. It will not be a lesser policy solely for the reason that it is effected by means of a continuation option. It could, however, have lower premiums and fewer or no exclusions which were specific to you, in comparison with a policy which you applied for in the usual way, for the reason that there is no assessment of your health when you exercise your continuation option. If that occurred then your continuation option policy would be superior to a policy which you applied for in the usual way.
Will my policy be ‘connected’ with my workplace plan?
No it won’t. When you exercise your continuation option you will have an individual insurance policy directly with Sovereign, and that policy will not be connected in any way with your workplace insurance plan.
What happens after I submit my application?
As soon as you submit your application you will see a message confirming receipt of your application, and an acknowledgement will also be emailed to you. The email will outline what happens next, and it will have contact details in the event that you wish to contact us while your application is being processed. We will keep you updated at each step, right through to acceptance and issue of your policy.
How long will it take to process my application?
Your application will undergo initial processing right away, and if there are no further details required it will be forwarded to the underwriting team. Depending on the number of applications currently held, the time taken to process your application could be from 2 to 10 days.
Can I change my mind after I receive my policy?
Yes you can. If at any time in the 15 days after you receive your policy you do not wish to continue your cover (for whatever reason at all), you can cancel your policy and get a full refund of any premiums you have paid - no questions asked. Alternatively you can reduce the amount of cover under your policy to any level, provided that it meets the minimum premium requirements of an individual policy.
Am I still covered if I travel or work overseas?
Yes you are, provided that no exclusion was applied to your policy for planned overseas travel when you exercised your continuation option. Otherwise, regardless of where you travel in the world, the reason for your travel or for how long you are away, your policy will keep you covered. This means that you remain covered even if you decide to leave New Zealand to work overseas.
How can I increase my cover if I need to or want to?
You can increase your cover in a number of ways: (1) by accepting any inflation increases which are offered to you each year; (2) in the case of life insurance and family protection insurance, by applying for additional cover without the need to provide any health information if you experience one of a number of "special events in your life; (3) in the case of trauma insurance and permanent disability insurance, by applying for more cover without the need to provide any health information, by using the built-in Benefit Increase Facility; or (4) by applying for additional cover in the normal way. In each case an increase in cover will attract an additional premium.
What is the ‘Guaranteed Enhancement Benefit’?
Your policy contains a Guaranteed Enhancement Benefit. This means that if at any time in the future a change is made to a section of the policy under which you are covered, and that change is favourable to you, then the enhanced section will automatically be applied to your policy, subject to the conditions specified in the policy.
Can I reduce my cover after my policy has been issued?
If your circumstances or your financial responsibilities change, you can reduce your cover at any time.
Is any tax payable on a benefit paid under my policy?
Under current New Zealand tax law there is no tax payable on any benefit which is paid under your life insurance or family protection insurance policy. Those benefits are payable tax free. In the case of income protection insurance, benefits are generally subject to income tax, but premiums are correspondingly tax-deductible.
If I give up smoking, can I get non-smoker rates too?
Yes you can. If you quit smoking for at least 12 months and you have no intention of resuming, you can go on to the non-smoker rates by completing a Non-Smoker Declaration PDF. If you have a continuation option and you have been a non-smoker for less than 12 months, you should still exercise your option and then submit your Non-Smoker Declaration as soon as you have completed 12 months as a non-smoker.
What happens if I miss a premium payment?
Don’t panic. Your cover will not immediately stop if you happen to miss a premium payment. Your policy provides 30 days’ grace for any premium due. If you miss a premium payment you should contact Sovereign right away and make arrangements to pay the missed premium. If you do nothing, and the premium remains outstanding beyond the 30 day grace period, then Sovereign is entitled to cancel your policy by written notice to you.
Can the insurer cancel my policy for any reason?
Sovereign can cancel your policy if a premium remains unpaid for more than 30 days after the premium due date. Sovereign can also cancel your policy if you did not disclose all material information at the time at which you applied for cover, or if you made a statement in your application which was material and substantially incorrect and was made either fraudulently or within the previous three years.
Will my policy ever have a cash value?
No. The premiums for your policy provide insurance risk cover only, and any other benefits as set out in your policy. Your policy does not acquire any surrender or cash value at any time.
The above provides a summary only of the benefits, terms and conditions of the policy. Please refer to the policy wording, including the policy appendix and schedule, for full details of the policy benefits and the terms and conditions under which they are provided.