How to compare life insurance properly

Comparison in this market is harder than it looks, because the products are not standardised. There is no New Zealand equivalent of a mandated policy schedule that makes two life policies directly equivalent. Each insurer writes its own wording, sets its own trauma condition list, defines terminal illness in its own words and applies its own underwriting appetite to the same health history.

That means a price comparison is comparing two things that are not the same product. It is still worth doing — the spread is large enough to matter over 25 years — but it should be the second step, not the first.

The first step is deciding what the cover has to do, which fixes the sum insured, the structure and whether you need trauma or income protection alongside it. Only once those are fixed does a price comparison mean anything.

As a sense of the spread, here is published market data for $500,000 of life cover on a 30-year-old non-smoking male, quoted before discounts.

The order in that table is not stable. Change the age, the sex, the smoking status or the sum insured and it reshuffles — which is exactly why quoting one insurer, or comparing on a single profile, is a poor way to buy. It is also why an insurer that is cheapest for a 30-year-old may be nowhere near cheapest for the same person at 50.

The comparison that is harder and matters more

• Terminal illness: does the wording require a life expectancy of 12 months or 24? That decides whether the money arrives while it is useful.
• Trauma: is the condition list severity-based, and are partial payments deducted from the full sum insured or paid on top?
• TPD: own occupation or any occupation, and does the definition change at a certain age?
• Income protection: agreed value or indemnity, and what income is offset against the benefit?
• Future insurability: can you increase cover after a baby or a house purchase without new medical evidence, and up to what limit?
• Pass-back: if the insurer improves its wording later, does the improvement apply to your existing policy?

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

• Whether a quoted premium includes a first-year discount, and what it becomes in year two.
• Whether both quotes are stepped, or one is stepped and one level — the difference is not a saving.
• Whether trauma is accelerated (reduces the life sum insured on claim) or standalone in each quote.
• Who actually underwrites the policy, which can differ from the brand on the front of it.
• Financial strength ratings, which are published and are a reasonable proxy for the insurer’s ability to pay in thirty years.
• How each insurer treats your particular health history — this can outweigh every price difference on the page.

Every New Zealand insurer writes compare all nz life insurers 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.

• Advisers hold the current wordings and can put two definitions side by side rather than two prices.
• They know which insurer is presently taking a given condition on standard terms and which will exclude it.
• They can structure across two insurers where that produces a better outcome than a single provider.
• They document why a recommendation suits you, which is a written record you can hold them to later.

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.