How much life insurance do you need

A life insurance payout has one job: to put the people who depend on you back into roughly the financial position they would have been in if you had not died. That is a more specific brief than “leave them something”, and it is why a proper calculation beats a rule of thumb.

Break the job into four parts. Each one is a separate number.

1. 1Debt that has to disappear — a mortgage a surviving partner cannot service on one income, car finance, credit cards, and any personal guarantee you have given for a business.
2. 2Income that has to be replaced, for as long as somebody actually relies on it. Usually until the youngest child is independent, or until the survivor’s own retirement savings take over.
3. 3Costs that arise only because you died: a funeral, estate administration, and the months in which nobody in the household is functioning well enough to work normally.
4. 4Work that now has to be bought. If one of you is at home with children, that is childcare, after-school care and school holidays at market rates.

Advisers use variations of the same calculation. Some call it a needs analysis, some call it DIME — debt, income, mortgage, education. The labels differ; the arithmetic does not.

1. 1

   Add the debt you want gone

   Current mortgage balance, not the original loan, then everything else. If the survivor would want the option of staying in the house mortgage-free, this number is the whole balance.

2. 2

   Decide how many years of income to replace

   Count the years until your youngest child is financially independent. If your partner does not work and would struggle to return to full-time work, extend it.

3. 3

   Multiply, then discount for reality

   Years × the portion of your after-tax income the household consumes. A lump sum invested conservatively earns something, but do not build a plan that requires your family to be good investors in the worst year of their lives.

4. 4

   Add the one-off costs

   Funeral, estate administration, legal fees, and a buffer for the year when the household is not coping. This is the part families most often say afterwards they wished they had allowed for.

5. 5

   Subtract what already exists

   Employer group life, any existing personal policy, KiwiSaver, liquid savings, and any cover attached to the mortgage through your bank.

6. 6

   Sanity-check the premium

   Ask what that number costs at your age under both stepped and level premiums. If you would not still be paying it at 60, size down now rather than lapse later.

These are illustrations built from assumptions we have chosen to show the arithmetic. They are not market data and not a recommendation — your own numbers will differ in every line.

The third column is the interesting one. A 29-year-old renting alone, with no dependants and a student loan that is written off on death, has almost no life insurance need. What they probably do need is income protection, because the thing genuinely at risk is their ability to earn. A good adviser will say that out loud.

If you insure $500,000 and owe $500,000, the payout clears the loan and stops. The house is safe. The household still has to eat, run a car, pay for childcare and get through the next fifteen years on one income instead of two. That gap is where families actually get into trouble, and it is invisible at the point of sale because clearing the mortgage feels like a complete answer.

• Decide first whether the survivor would want to keep the house. If they would sell and downsize, you may need less than the loan balance.
• If they would stay, insure the full balance rather than the amount the bank suggests.
• Then add the income layer on top. Cover that clears the mortgage and replaces five years of income is a different decision from cover that just clears the mortgage.
• Reducing cover as the mortgage falls needs no medical evidence. Increasing it later usually does, so err high at the start.

Buying cover you already hold is the quietest way to waste money in this market.

That last line catches people out constantly. New Zealand has an accident scheme, not a sickness scheme. If the risk you are insuring is illness — and statistically it usually is — ACC is not part of your answer.

Your calculation produces a number. Financial underwriting decides whether the insurer will write it. Insurers assess whether the sum insured is justified by your financial position, and express the maximum as a multiple of income — generally more generous when you are young, tightening as you approach retirement.

• Above a threshold that differs by insurer you will be asked for financial evidence: payslips, tax returns, or an accountant’s letter if you are self-employed.
• Cover for a business purpose — key person, shareholder protection, a loan guarantee — is justified against the business’s numbers rather than your salary.
• A stay-at-home parent can usually be covered, often to a limit linked to the working partner’s sum insured.
• Very large sums insured are sometimes split across two insurers. That is a normal arrangement and something an adviser organises for you.
• These limits are insurer-specific and change. Nobody should quote you a universal multiple as if it were a rule.

Sizing cover in isolation is an academic exercise. The real constraint is what you will keep paying for at the age when the premium is highest and the claim is most likely.

Two things are worth noticing. The cheapest and dearest quotes for identical cover differ by about a third — the same promise, a third apart in price. And these are all for a 40-year-old in good health; the same table for a 55-year-old smoker runs into the thousands.

Every premium figure on this page is a published market example collected from a named source on a named date. We do not run a quote engine and we do not adjust the numbers. Here is exactly what they are and what they are not.

• The annual figures are MoneyHub’s, from a page last updated 11 June 2026, for $500,000 of life cover.
• The monthly figures are Quashed Market Scan data, from a page last updated 15 May 2026, covering three insurers only.
• Both sets are quoted before discounts — healthy-lifestyle, membership, multi-benefit and first-year discounts are all excluded, and any of them can move the number materially.
• Both assume a clean health history. A loading for weight, blood pressure, mental health history or a family history can add anywhere from a small percentage to well over half again.
• Neither set includes the policy fee treatment, which differs between insurers and matters more on small sums insured than large ones.
• Rates change. An insurer that leads a table one quarter can sit mid-pack the next, which is the whole argument for having someone re-quote the market rather than trusting a table.

Treat these as the shape of the market, not as your price. The only number that is yours is the one an insurer puts in writing after it has seen your health history.

Every New Zealand insurer writes life 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.

• Financial underwriting limits differ enough that the same person can be offered materially different maximum sums insured.
• Special events and future insurability benefits let you increase cover without new medical evidence after a birth, a house purchase or a salary rise — the triggers and dollar caps are not standard.
• Splitting a large sum insured across two insurers is sometimes the only way to get the full amount written.
• Indexation defaults differ, and a policy that quietly indexes for fifteen years is a very different sum insured from the one you bought.
• Where affordability is tight, an adviser can structure part of the cover level and part stepped so the essential layer survives.

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.