Is life insurance worth it?

The question is asked in two different ways and deserves two different answers. Sometimes it means “is this product a rip-off”. Sometimes it means “does my household actually need this”. They are separate questions and the second is the one worth spending time on.

On the first: life insurance is not designed to be good value on average, and no honest page will claim it is. Most people who buy life cover die long after the policy ends, having claimed nothing. That is the point. You are not buying an expected return, you are buying the removal of a specific catastrophic outcome from your family’s range of possible futures. Judged as an investment it is poor. Judged as a risk transfer it can be extraordinary — a few hundred dollars a year turning a $600,000 mortgage into a paid-off house.

On the second: the test is whether anyone would be financially worse off if you died. Not sad — worse off. If the honest answer is nobody, life cover is solving a problem you do not have, and you should look at income protection and trauma cover instead, which pay you while you are alive.

Where it is clearly worth it

• A mortgage that one income cannot service alone.
• Children young enough that someone would have to fund their upbringing without you.
• A partner whose own retirement plan assumed your continued earnings.
• A business with debt personally guaranteed, or a co-owner who would have to buy out your share.
• A stay-at-home parent whose unpaid work would have to be paid for.
• An estate where one child inherits an illiquid asset — a farm, a business — and the others need equalising.

Where it usually is not

• No dependants, no shared debt, no business obligation. Nobody is financially exposed to your death.
• Adult children who are independent and a mortgage that is paid off.
• Sufficient assets that the estate could absorb every liability without hardship.
• A situation where the premium is so high relative to your income that the policy will lapse anyway. Cover you cannot sustain is worse than no cover, because you pay for it and then lose it.

The comparison that decides it

Do not compare the premium against nothing. Compare it against the specific outcome it removes. If the annual premium is roughly the cost of a weekly coffee habit and the outcome it removes is your family selling the house within a year, that trade is easy. If the premium is materially straining the budget and the outcome it removes is an estate paying a small residual loan slightly later, it is not.

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

• Cover sized to a rule of thumb rather than to your actual debt and dependants.
• Stepped premiums on cover you intend to hold for thirty years — the cancellation risk is the real risk.
• Buying life cover when income protection is the more probable claim for your household.
• Assuming employer group life is enough. It ends with the job and is usually a modest multiple of salary.
• Under-disclosure at application, which is the one thing that genuinely does put a payout at risk.
• Paying for cover on a non-earning adult while the main earner has none, or the reverse.

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 will tell you if you do not need cover, or need less of it than you think.
• They can point the budget at the product with the highest probability of claiming for your circumstances.
• They structure cover so it is still affordable at 60, which is where most of the value actually sits.
• They make sure the disclosure is complete, which is what turns a policy into a payment.

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.