Premium structures compared

Every life insurance premium is an answer to the same question: what does it cost to insure this person for the next twelve months? Under stepped premiums you pay that figure each year, so it starts low and climbs. Under level premiums the insurer averages the cost across the whole period to a chosen expiry age and charges the average every year.

Neither is inherently better value. Stepped defers the cost, which suits a short need or a tight budget now. Level front-loads it, which suits a long need and protects you from the point at which premiums become unaffordable.

The failure mode of stepped is well documented in this market. People take it out in their thirties, hold it happily for twenty years, and cancel in their late fifties when it starts to bite — losing the cover at the age when a claim is most likely.

That model uses 3% a year, which is the conservative end. New Zealand stepped increases commonly run higher, and every extra percentage point pulls the crossover forward. Ask for cumulative cost at 3% and at 8%, run to the age you actually expect to hold the cover — not the annual figure, and not a comparison that stops at 55 where stepped still looks good.

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

• The growth rate used in any stepped illustration you are shown, and whether it is realistic.
• What happens at a level policy’s expiry age — some end, some convert to stepped at your attained age.
• Whether the insurer can reprice a class of policies, and on what notice.
• Whether indexation is switched on in the model, since CPI increases apply to both structures and compound.
• Whether you can convert from stepped to level later, and whether an age limit applies.
• Whether the comparison runs to the age you will really hold cover, or stops early.

Every New Zealand insurer writes what life insurance costs in nz 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.

• Stepped rate tables differ between insurers, so the crossover point is insurer-specific rather than universal.
• Conversion rights from stepped to level are not standard and usually carry an age limit.
• Splitting cover across structures inside one policy often beats choosing one, and it is not something people arrange for themselves.
• Where affordability is genuinely tight, a smaller level sum insured usually beats a larger stepped one that gets cancelled at 58.

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.