Life insurance in retirement

Retirement removes the primary reason people buy insurance. There is no salary to replace, no mortgage on most households, and no dependent children. If your estate can meet its own costs and your partner is financially secure without you, the honest conclusion is that you may not need life cover at all, and that any income protection you are still paying for should be cancelled.

The complications, where they exist, are structural rather than about income. The family home is not divisible and not quickly saleable. A holiday house or a rental may carry a mortgage and a tax position. A business share or a farm may be going to one child. KiwiSaver, which for many retirees is a substantial balance, is paid to the estate and may sit there until probate is granted.

Set against that, the surviving partner’s position matters. NZ Super drops from the couple rate to the single rate, and household costs do not halve. Where retirement income is modest, a small life policy on each partner is a reasonable way to bridge that step down rather than a legacy from an earlier decade.

1. 1Cancel income protection. There is no income to insure and the premium is dead money.
2. 2Check whether any trauma or TPD cover attached to your policies has already reduced or ceased at a set age.
3. 3List what your estate would have to pay in cash: funeral, debts, legal costs, any tax.
4. 4Check whether your assets could produce that cash without a forced sale, and how long probate would take.
5. 5Decide whether an inheritance needs equalising because one child will receive an indivisible asset.
6. 6Size any remaining life cover to those numbers, and reduce rather than cancel where a policy is old.

A word about keeping old policies

A policy taken out decades ago was underwritten on the health you had then. If you have had anything since — a cardiac event, a cancer, a joint replacement — that contract is worth considerably more than its premium suggests, because no insurer would issue it today. Reduce the sum insured if the cost is the problem. Surrendering it converts something irreplaceable into a monthly saving.

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

• Whether you are still paying for income protection or a mortgage repayment benefit that can no longer pay.
• Whether trauma or TPD attached to your life cover has expired, leaving you paying a life-only premium billed as a package.
• Whether your will and your policy nominations still match, particularly after a death or a remarriage in the family.
• Whether KiwiSaver, which is paid to the estate, would be delayed by probate at the moment funds are needed.
• Whether a policy has a cash or surrender value, which older whole of life policies sometimes do.
• Whether cover is genuinely unaffordable or simply feels expensive relative to a fixed income — reducing is usually available.

Every New Zealand insurer writes cover in 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.

• Identifying cover that is now redundant, which is money back in your pocket every month.
• Distinguishing between a policy that should be reduced and one that should be released.
• Sizing estate liquidity cover against real figures from your own affairs rather than a general rule.
• Coordinating with your lawyer and accountant where a trust, a business or a farm is involved.

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.