How to buy life insurance

Buying life insurance well is mostly about sequence. The market presents it as a shopping problem — compare prices, pick a brand — and that framing produces households with $250,000 of stepped life cover, no income protection and a $600,000 mortgage.

The order that works starts with the events you are insuring against, moves to the size of the loss each one would cause, then to the structure that keeps the cover alive long enough to be there, and only then to which insurer will write it best for you.

The other thing worth knowing before you begin is that the route you choose does not change the price. Insurers build distribution cost into their rate tables whether or not an adviser is involved. Going direct does not buy you a discount; it buys you the job of doing the comparison yourself.

1. 1

   What are you insuring against

   Death, a serious diagnosis, being unable to work, or the mortgage specifically. Different products, different probabilities. Most households need more than one and can rarely afford everything at once.

2. 2

   How much

   Debt to clear, plus income to replace for a defined number of years, plus final costs, less what you already hold. Do the arithmetic before you look at any price.

3. 3

   For how long

   Take the later of the date your mortgage is repaid and the date your youngest child is independent. That is the horizon the cover has to survive.

4. 4

   Stepped or level

   The decision with the biggest lifetime cost. Short horizons favour stepped; anything you intend to hold past your mid-fifties usually favours level. Ask for cumulative cost, modelled at more than 3% a year.

5. 5

   Structure and ownership

   Accelerated or standalone trauma. Single or joint policies. Who owns the policy, and who is named as beneficiary. These decide how the money is taxed, who controls it, and how quickly it arrives.

6. 6

   Which insurer

   On price for your profile, on the wordings that matter to you, and on which one will take your health history on the best terms. That last one is often decisive and is not published anywhere.

7. 7

   Apply, disclose fully, and check the terms offered

   The offer of terms is the real contract, not the quote. Read the exclusions and loadings before you accept, and get written confirmation of the date cover starts.

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

• Buying the product you have heard of rather than the one you are most likely to claim on.
• Choosing a sum insured that fits a monthly budget rather than the loss it is meant to cover.
• Accepting stepped premiums by default because they are cheaper on the quote in front of you.
• Leaving the beneficiary nomination blank, which sends the money through your estate and slows it down.
• Rushing disclosure to hit a settlement date. This is the one shortcut that can cost the whole claim.
• Cancelling existing cover before the new policy is confirmed in force.

Every New Zealand insurer writes life insurance in new zealand 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 runs the sequence in the right order, which is the single biggest determinant of whether cover works.
• They can access a panel, so your health history is shopped rather than tested against one insurer’s appetite.
• They handle ownership and beneficiary structuring, which most people get wrong and never find out about.
• They are the person who presents the claim, which is when the quality of the original advice becomes visible.

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.