Bank life insurance versus buying from an insurer

Every New Zealand bank sells personal insurance alongside lending, and it works: a large share of first life policies arrive with a mortgage. There is nothing improper about that. The cover is real, and for someone who would otherwise buy nothing it is better than nothing.

But three structural features of the channel are worth understanding before you accept an offer. The first is scope: a bank distributes one insurer’s product range. Whatever the strengths of that range, you are being shown one option out of the market, and the person showing it to you cannot compare it against the others because they do not have access to them.

The second is who carries the risk. Bank-branded life cover in New Zealand is almost always underwritten by a third-party licensed insurer. That is the company whose wording applies, whose underwriters assess your application, whose claims team decides your claim, and whose dispute resolution scheme you would use. Ask for its name in writing.

The third is timing. The offer arrives while you are arranging finance — mid-application, focused on settlement, and disinclined to introduce friction. It is a very effective moment to sell insurance and a very poor moment to buy it.

The four questions to ask a bank

1. 1Which licensed insurer underwrites this policy, and which dispute resolution scheme does it belong to?
2. 2Is any of this cover a condition of my lending? (The answer for personal life, trauma, TPD and income cover is no.)
3. 3Is the policy owned by me and paid to my nominated beneficiary, or is it assigned or tied to the loan? Does it survive a refinance to another lender?
4. 4Is the application fully underwritten, or is there a general pre-existing condition exclusion in the wording?

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

• Whether the sum insured reduces automatically with the loan balance, and whether you wanted that.
• Whether the policy ends if you refinance with a different lender.
• Whether the bank or the family is the beneficiary of the payout.
• Whether the range offered includes income protection, which is often the cover a working household needs most.
• Whether the same underwriter offers a broader wording through advisers than the version sold in the branch.
• Whether a bundled discount on other bank products is conditional on keeping the insurance.

Every New Zealand insurer writes life and living cover 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.

• A bank shows you one insurer. An adviser shows you several — sometimes including the same underwriter on a fuller wording.
• An adviser is not on the other side of your lending decision, which removes a structural conflict.
• An adviser can arrange portable cover that survives a change of lender.
• Ownership and beneficiary structuring is something an adviser does deliberately and a lending conversation usually does not.
• When the mortgage changes, an adviser reviews the cover. Bank-arranged cover is rarely revisited.

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.