Switching life insurance without losing cover

Switching insurers is the part of this market where consumer interest and commercial interest are most obviously misaligned. Replacement business pays upfront commission. That does not make every recommendation to switch a bad one, but it does mean you should expect the reasoning in writing and should read it carefully.

The mechanical risk is simple. Your existing policy was underwritten against the person you were when you applied. If you have had anything happen since — a diagnosis, an investigation, a change in build, a medication started — the new insurer assesses all of it. You may be offered the same cover with a loading, with an exclusion, or not at all.

The worst outcome, and it happens, is cancelling the old policy in anticipation and then finding the new one comes back on terms you cannot accept. At that point you have neither. It is entirely avoidable, and avoiding it costs nothing but a few weeks of paying two premiums.

1. 1Do not touch the existing policy. Not a cancellation, not a payment holiday, not a reduction.
2. 2Get the new cover quoted and apply, disclosing everything fully, including anything that has changed since your original application.
3. 3Wait for the insurer’s offer of terms. Read it — the terms offered are not necessarily the terms quoted.
4. 4Compare the offered terms against your existing policy clause by clause: terminal illness, trauma list, TPD definition, exclusions, loadings, indexation, premium structure.
5. 5Accept, pay the first premium and get written confirmation that the new policy is in force.
6. 6Only then cancel the old policy, in writing, with an effective date on or after the new policy’s start date.
7. 7Keep both confirmations. You want a paper trail showing there was no day on which you were uninsured.

What you lose that is easy to overlook

• Time already served against any pre-existing condition or suicide clause on the original policy — these usually restart.
• Trauma stand-down periods, which begin again on the new policy.
• An older wording that may be more generous than what is currently sold, particularly on trauma condition lists.
• Any pass-back benefit under which your old insurer applies wording improvements to your existing policy.
• Continuity of a loading you have already accepted — a new insurer may load you more heavily, or exclude what the old one merely loaded.

When switching genuinely is the right call

• You need a premium structure change the current insurer will not offer — moving to level, for example, when stepped is becoming unaffordable.
• A condition that was loaded or excluded years ago has since stabilised, and another insurer will now take it on better terms.
• Your current insurer’s wording has a specific weakness that matters to you, and a competitor’s is materially better on that point.
• Your cover was arranged at a mortgage settlement, was never compared, and is priced well above the market for the same terms.
• Your circumstances have changed enough that the policy no longer fits — new occupation class, self-employment, a much larger sum insured.

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

• Any recommendation to switch that does not include a written comparison of the old and new wordings.
• Advice to cancel first “to avoid paying two premiums”. The overlap is the cheapest insurance you will ever buy.
• New stand-down and pre-existing condition periods restarting on the replacement policy.
• Whether the new policy is guaranteed renewable, and whether the old one was.
• First-year discounts that make the replacement look cheaper than it will be in year two.
• Whether your old policy is one an insurer no longer sells, which sometimes means better terms than anything available now.

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.

• An adviser recommending replacement is required to document why the switch leaves you better off — hold them to it.
• They can pre-assess your current health with the new insurer before anything is cancelled.
• They can sequence the application so the two policies overlap and there is never an uncovered day.
• They can often improve your existing policy without replacing it, which is the outcome that pays them least and suits you most.

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.