KiwiSaver and life insurance

KiwiSaver and life insurance are often mentioned together because both involve money arriving when something goes wrong. The similarity ends there. A life policy pays an agreed sum insured regardless of how long you have held it; KiwiSaver pays whatever you have accumulated. For a 34-year-old with two children, those are very different amounts.

On death, a KiwiSaver balance forms part of your estate. That means it is distributed under your will, and it is subject to the estate administration process — including probate, which takes time. A life insurance policy with a nominated beneficiary generally pays that person directly and much more quickly, which is one of the practical reasons the two are not interchangeable.

KiwiSaver does have a protection role at the margins. Withdrawals are possible in cases of serious illness or significant financial hardship, subject to the scheme’s criteria and the supervisor or trustee being satisfied. Those are useful provisions, but they are discretionary processes with evidence requirements, not an insurance claim.

1. 1Find your current balance and treat it as an existing asset in the needs calculation.
2. 2Do not project it forward optimistically — the relevant figure is what it is worth if you died this year.
3. 3Remember it goes through your estate, so assume a delay before your family can access it.
4. 4Check your will is current, since that is what actually determines who receives it.
5. 5Subtract the balance from the cover you need, then insure the gap.
6. 6Review it as the balance grows, because in your fifties and sixties it becomes a much larger part of the picture.

There is also a serious illness withdrawal to be aware of. Where a member is suffering from a serious illness as the scheme’s rules define it, an early withdrawal can be approved. It is worth knowing about — but it draws down your retirement savings to fund a present crisis, which is exactly what trauma cover and income protection exist to avoid.

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

• Whether your will is current, since it determines who receives your KiwiSaver balance.
• That probate can delay access to the balance at the point a family needs cash quickly.
• The criteria your scheme applies to serious illness withdrawals, which are not identical across providers.
• That withdrawing early reduces your retirement savings permanently.
• Whether you have counted KiwiSaver in your needs calculation, or forgotten it entirely.
• That a KiwiSaver balance is not protected from creditors of the estate in the way a nominated policy benefit can be.

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 count existing assets, including KiwiSaver, before recommending a sum insured — which usually reduces the cover you need to buy.
• Where a family needs money quickly, an adviser can explain how a nominated life policy pays outside the estate while KiwiSaver does not.
• Advisers frequently identify that a will is out of date at the same time as arranging cover, which is a useful side effect.
• For people close to retirement, the growing KiwiSaver balance is often a reason to reduce life cover rather than keep paying for it.

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.