Life insurance for pre-retirees

The pre-retirement decade has an unusual property: almost every insurance decision made in it is irreversible. Reduce cover and you cannot restore it without new underwriting. Let a policy lapse and you are unlikely to replace it. Choose a level premium expiring at 65 and the cover stops at 65, whatever your circumstances are then. None of those doors reopen.

At the same time the financial picture is at its most complicated. The mortgage may be nearly gone but not quite. Adult children may be independent or may still be at home. A business may be heading towards sale or succession. KiwiSaver is becoming a meaningful number. And superannuation is close enough to plan around but not yet arriving.

The result is that this is the decade where a proper review is worth the most, and where the default — leave everything as it is and reconsider when the premium becomes annoying — costs the most. The premium becoming annoying and the cover becoming valuable are the same event.

Choosing the expiry age

If you are converting cover to level in this decade, the expiry age you choose is the most consequential number in the policy. Level to 65 is cheapest and stops exactly when many of the reasons for cover — estate costs, a partner’s income — are still live. Level to 80 costs considerably more per year and keeps the cover alive through the period when a claim is actually likely.

The right answer follows the purpose. Cover replacing employment income can reasonably end at 65. Cover intended to pay estate costs or to balance an inheritance should run to 80 or beyond, because that is when it will be needed. Buying the cheaper option and discovering the mismatch at 66 is not a recoverable position.

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

• Whether existing level cover expires at 65 and what happens at that point under the wording.
• Whether TPD converts from own occupation to any occupation at a set age, which changes what you could claim.
• Whether trauma cover reduces at 65 or 70 automatically.
• Whether employer cover has already reduced, and what continuation option exists when you leave.
• Whether indexation is increasing cover you no longer need, at premiums you will resent in five years.
• Whether a business succession or share sale creates or removes an insurance need.

Every New Zealand insurer writes cover before retirement 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.

• Deciding, with numbers, what to carry into retirement and what to allow to end.
• Modelling expiry age options while conversion rights are still open.
• Reviewing an existing plan for benefits that have quietly reduced or expired but are still being charged for.
• Coordinating with an accountant where a business, a farm or a trust is part of the retirement plan.

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.