Life insurance for young adults

At twenty-five most people own a car, some savings and a KiwiSaver balance that would not last a year. What they actually own is four decades of future earnings, and that is the asset the insurance conversation should start with. Income protection insures it. Almost nothing else does.

The counter-argument people reach for is ACC. ACC is genuinely comprehensive for injury and it will cover you for the accident on the ski field or the crash on the way to work. It does not cover illness, and the conditions that take a thirty-year-old out of the workforce for six months are as often illnesses as injuries. That is the hole.

Employer cover is the second false comfort. Group schemes are a real benefit and worth having, but the sums insured are usually small multiples of salary, the income protection component often has a short benefit period, and the whole thing ends when you leave. Very few people check what happens to their group cover before they resign, and by the time they do they have a new health history.

1. 1Income protection first, sized to your take-home costs, with the longest benefit period you can afford.
2. 2Trauma cover next if you have debt or no savings, because it pays a lump sum quickly on diagnosis.
3. 3Life cover if someone depends on you, if you have a mortgage, or if a family member guaranteed a loan.
4. 4Get the premium structure right — stepped now is affordable, but understand what it costs at fifty.
5. 5Choose a policy with strong future insurability options so cover can grow with your life.

Why the health you have now is worth protecting

Underwriting fixes your terms at application. If you take out cover at twenty-eight and are diagnosed with something at thirty-four, the policy continues on the original terms — the insurer cannot reprice you individually or add an exclusion after the fact. If instead you apply at thirty-four, that diagnosis is on the application and it may mean a loading, an exclusion, or a decline.

That asymmetry is the strongest argument for buying earlier than you feel you need to. It is not about getting a cheap premium today. It is about owning a contract before your health can be used to price it.

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

• What your employer scheme actually covers, its benefit period, and whether you can continue it personally when you leave.
• Whether your income protection waiting period matches your savings, which at this age are usually thin.
• Whether the benefit period runs to 65 or stops after two or five years — the short options fail on serious claims.
• Whether cover includes a special events benefit for a mortgage, marriage or a child.
• Whether any KiwiSaver-linked insurance you hold is genuinely comparable to a standalone policy.
• Whether you are being sold accidental death cover, which is cheap because it pays in very few situations.

Every New Zealand insurer writes cover for a young adult 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.

• Working out how much of your budget goes to insurance and then allocating it in the right order, which at this age is rarely life cover first.
• Comparing income protection wordings, where the difference between insurers is much larger than the difference in price.
• Explaining the stepped-versus-level decision in terms of what it costs at fifty, not at twenty-eight.
• Making sure the cover has the increase options that will matter over the next fifteen years.

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.