Cheap life insurance, and what it costs you later

Cheap is a legitimate goal. Most New Zealand households are working to a budget, and a policy that gets cancelled because it costs too much protects nobody. The honest version of this page is not “do not buy cheap cover”, it is “know which lever you are pulling”.

There are four ways a life insurance quote gets cheaper. You can buy less cover. You can buy it on a structure that defers the cost. You can buy a product with narrower terms. Or you can find the insurer that happens to price your particular profile well. Only the last of those is a free lunch, and it is the one that requires comparing a panel rather than a brand.

The other three are trades. They may well be the right trades — a smaller sum insured you keep beats a larger one you cancel — but they should be made deliberately, with the cost written down, rather than discovered at renewal or at claim.

Before you accept that one quote is cheaper than another, run the two through this list. If any line differs, you are not comparing the same thing.

1. 1Same sum insured, to the dollar.
2. 2Same premium structure — both stepped, or both level to the same expiry age.
3. 3Same product mix. Trauma accelerated against the life cover is cheaper than standalone trauma, and pays differently.
4. 4Same waiting period and benefit period, if income protection is in the quote.
5. 5Both figures either include or exclude the policy fee — and check whether each policy charges one fee or two.
6. 6Both figures are the ongoing premium, not the year-one discounted premium.
7. 7Indexation set the same way on both, because CPI increases compound into the premium.
8. 8Terminal illness, trauma and TPD definitions read side by side, not assumed to be equivalent.

There is one genuinely reliable way to reduce a premium that most people do not use: pay annually rather than monthly. Most New Zealand insurers apply a discount for annual payment, and it is a real reduction in cost with no reduction in cover. Right-sizing the sum insured against what you actually owe is the other, and it usually finds more money than switching insurer does.

These are the details that decide whether the cover does what you expected. Read them before you compare on price.

• A stepped premium quoted at 35 tells you almost nothing about affordability at 60. Ask for the projection.
• Trauma cover with a short condition list is cheaper, and the conditions left off are usually the common ones.
• Some cheap policies are not guaranteed renewable, so the insurer can decline to continue cover.
• Cover sold with no underwriting at application is usually underwritten at claim instead, which is the worst possible time.
• A low premium on a policy you would fail to disclose properly on is worth nothing — disclosure is the real price of admission.
• Watch for cover that reduces automatically with age while the premium does not.

Every New Zealand insurer writes what life insurance costs to its own wording, and the words are where the money is. Two policies that look identical on price can pay very differently when it matters. Closing that gap is the entire job of an adviser.

• An adviser can show you where the price difference comes from — a definition, a structure or genuinely better pricing.
• They can find the insurer that prices your age, occupation and health profile best, which is the only saving with no trade-off.
• They will tell you if the honest answer is a smaller sum insured you can keep rather than a larger one you cannot.
• They can restructure existing cover — splitting level and stepped, or repricing an old policy — before you cancel anything.

There are three ways to buy life cover in New Zealand, and they are not equivalent. You can buy direct from one insurer, which means you see one product range and one underwriting appetite. You can buy through your bank, which usually means a single insurer’s product sold under the bank’s brand, often with narrower definitions. Or you can go through an adviser, who quotes several insurers at once and is required to put your interests first.

The premium you pay is the same either way. Insurers build adviser commission into their pricing whether or not an adviser is involved, so going direct does not get you a discount — it just removes the person whose job is to argue your corner at application and at claim time.

• An adviser can see which insurer is currently taking your health history on standard terms, and which one will load or exclude it.
• An adviser can structure cover across two insurers if that produces a better outcome than putting everything with one.
• An adviser handles the underwriting back-and-forth, and is the person who chases the claim when a family is least able to.
• An adviser has to document why the recommendation suits you, which is a written record you can hold them to.

We are a referral service, not an insurer. We do not quote premiums and we do not sell policies. What we do is put you in front of one licensed New Zealand adviser who can compare the market properly.

1. 1

   You tell us what you are looking at

   The form takes about a minute. Nobody asks for your medical history on a web form — that conversation happens with the adviser, properly, and only once you have decided to proceed.

2. 2

   An adviser calls you

   A licensed New Zealand adviser talks through your situation: who depends on you, what you owe, what you already have in place, and what you are actually worried about.

3. 3

   They compare the market

   The adviser quotes across the major insurers, checks which of them will take your health history on the best terms, and puts the options side by side in writing.

4. 4

   You decide, in your own time

   There is no obligation and no cost to you. If the answer is that you already have enough cover, a good adviser will tell you that.