Indexation and CPI increases

Indexation is the mechanism that stops a fixed sum insured turning into an inadequate one. A $600,000 policy taken out today does not buy $600,000 of purchasing power in fifteen years, and the mortgage and living costs it was sized against will not have stood still either. Each year the insurer offers to increase your cover in line with inflation, and charges for the increase.

The important structural point is that the increase requires no health evidence. That makes indexation quietly valuable: once your health has changed, it may be the only way left to grow your cover. Someone diagnosed with a serious condition at 45 cannot buy new cover easily, but can usually keep accepting indexation on the policy they already have.

The cost is real, though, and it compounds in a way people do not expect. The additional cover is priced at your current age, so on stepped cover you get an age-related increase plus an indexation increase every year. On level cover, where the point was a fixed premium, indexation adds an increase the “level” label appeared to rule out.

Indexation is not a yes-or-no decision made once. It comes back every anniversary, and the right answer changes as your circumstances do.

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

• The rate used: CPI, a stated minimum percentage, or the greater of the two.
• Whether the increase is automatic unless declined, and how you decline it.
• Whether declining a set number of times in a row removes the option permanently.
• Whether indexation continues after a certain age, and whether it stops on level premium policies at expiry.
• How indexation applies to trauma and TPD benefits attached to the same plan, and whether they can be indexed separately.
• Whether indexed increases are subject to the original policy terms, including any loading or exclusion.

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.

• Indexation rules differ enough to be a genuine comparison point — the definition of the rate, the age it stops, and the decline provisions.
• An adviser can index the life cover while declining it on a trauma benefit, which is often the right split.
• Where affordability is tight, declining indexation is usually the first lever to pull, ahead of reducing the sum insured.
• An annual review is the moment to decide this deliberately rather than letting the default run for a decade.

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.