Life stages
Life insurance after redundancy
Losing a job puts every discretionary payment under review, and insurance premiums look like an obvious cut. Before you cancel anything, understand what you would be giving up and what alternatives your insurer already offers.
Last reviewed 4 September 2026 · Written and checked by the Best Life Insurance editorial team · How we get paid
In short
- Income protection does not pay for unemployment. It responds to illness and injury, not to a lack of work.
- Redundancy cover is a separate benefit, usually with a qualifying period, a short benefit period and exclusions.
- You cannot buy redundancy cover once redundancy is foreseeable — insurers exclude what you already knew about.
- Group cover through the employer ends with the job, often on your last day.
- Most insurers offer alternatives to cancellation: reduced cover, longer waiting periods, or a premium suspension.
- Cancelling cover and reapplying in a year means new underwriting at a new age with any new health history.
What this is, plainly
Redundancy creates a specific and frustrating problem. The insurance you have been paying for does not respond to the event that has happened, and the insurance that would have responded had to be arranged before you knew about it. Income protection insures your health, not your employment, and no New Zealand insurer will pay a disability benefit because a role was disestablished.
Redundancy cover does exist, generally as an add-on to a mortgage protection or income protection policy. It typically requires that the policy has been in force for a qualifying period, often six months, before a claim can be made, pays for a limited number of months, and excludes voluntary redundancy, fixed-term and contract work, and any redundancy you had reason to expect when you applied. Those conditions are not fine print buried to catch people out — they are what makes the cover possible at all.
So the practical question after a redundancy is not how to claim. It is how to keep the cover you hold through a period of reduced income, so that when you are working again you have not traded a long-term asset for a few months of relief.
Alternatives to cancelling
| Option | What it does | What it costs you |
|---|---|---|
| Reduce the sum insured | Lowers the premium immediately, no underwriting needed | Less cover; increases later need underwriting |
| Turn off indexation | Stops the annual CPI increase to cover and premium | Cover erodes in real terms |
| Lengthen the waiting period | Cuts income protection premium significantly | You self-fund longer before a claim pays |
| Move standalone trauma to accelerated | Reduces cost by attaching trauma to life cover | A trauma claim reduces the life sum insured |
| Premium suspension or holiday | Pauses payments for a period where the policy allows | Cover may be limited or suspended during the pause |
| Cancel | Removes the premium entirely | Contract ends; reapplying means new underwriting |
Not every option is available on every policy. Ask your insurer or adviser what your specific wording permits.
Group cover ends too
Redundancy usually removes employer-provided life, trauma and income cover at the same time as the salary. If your group scheme includes a continuation option, the window to convert to a personal policy without full underwriting is short and starts running from your last day. Ask HR for the scheme documentation during the redundancy process, while people are still willing to help.
Not sure what cover you actually need?
That is the question an adviser is there to answer. Tell us your situation and a licensed New Zealand adviser will compare the market and come back with a written recommendation — including where you can cut cover you do not need.
No cost to you and no obligation. General information only — not personalised financial advice.
What to watch for
These are the details that decide whether the cover does what you expected. Read them before you compare on price.
- Whether any redundancy benefit you hold has a qualifying period that has already been satisfied.
- Whether the redundancy was voluntary, which most redundancy benefits exclude.
- Whether your group cover has a continuation option and how many days you have to exercise it.
- Whether a premium suspension pauses cover as well as payments, which some do.
- Whether reducing income protection now creates a problem when you are re-employed at a different salary.
- Whether KiwiSaver hardship withdrawals or other measures are being considered, which is a financial advice question in its own right.
Where an adviser makes a difference
Every New Zealand insurer writes cover during a period without income 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.
- Finding the least damaging way to reduce cost, which is rarely the option a call centre offers first.
- Establishing whether a redundancy benefit is claimable under your specific wording and timing.
- Preserving underwritten cover through a period of reduced income so it is still there afterwards.
- Rebuilding the plan once you are re-employed, including any group continuation option.
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.
What happens if you get in touch
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
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
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
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
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.
Frequently asked questions
Does income protection cover redundancy in New Zealand?
No. Income protection responds to illness or injury that prevents you working. Redundancy is not a disability and is not covered. Some policies offer a separate redundancy or involuntary unemployment benefit, which has to be arranged in advance.
Can I add redundancy cover now that I have been made redundant?
No. Insurers exclude events that are already known or foreseeable at the time of application, and redundancy benefits carry a qualifying period — often around six months — before any claim can be made. It has to be in place well before it is needed.
How long does redundancy cover pay for?
Typically a short period, commonly a few months rather than years, and usually capped at a set proportion of your income or your mortgage payment. It is designed to bridge a gap, not to replace employment. Check the benefit period and the exclusions in your specific policy.
What can I do if I cannot afford my premiums right now?
Contact your insurer or adviser before the payment fails. Reducing the sum insured, turning off indexation, lengthening a waiting period or using a premium suspension where the policy allows are all ways to cut cost while keeping the contract alive.
What happens if my policy lapses because a payment failed?
Insurers usually allow a short grace period and then a limited reinstatement window, often requiring health declarations. After that the policy is over. Because lapses are easy to cause and hard to undo, it is worth telling the insurer you are struggling rather than letting a payment bounce.
Should I use my redundancy payment to keep cover going?
Keeping cover in force is usually a good use of a small part of it, particularly if you have any health history that would make new cover difficult. Whether that is the right priority against your other commitments is a broader financial question worth discussing with an adviser.