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Industry data collected by the Financial Services Council (FSC) NZ since 2022 shows that about 35% of New Zealanders have life insurance coverage. Not surprisingly the uptake is low among those aged 18-25 whereas around 70% of those aged 36-55 hold a life insurance policy. 

Whatever stage of life you’re in, having life insurance is worth it. And whilst cost is, according to the FSC, the primary barrier preventing individuals from taking out life insurance policies, at The Finance Hub, our team can help you find the right policy for your budget and lifestyle. 

What is Life Insurance?

Life insurance is designed to help your family and loved ones with the financial impact of you passing away or being diagnosed with a terminal illness or suffering an injury that is likely to result in you passing away.

It is a lump sum that is paid out either when you pass away or when you receive a terminal diagnosis. 

The Benefits of Having Life Insurance 

Having life insurance provides you with the peace of mind that financially your family and loved ones would be supported if you were to pass away.

The beneficiaries of the life insurance policy have complete flexibility to spend it how they like, but commonly it is used for: 

• Paying funeral and medical bills. 
• Paying off a mortgage, credit card debt and loans.
• Paying for care if a terminal illness has left you unable to work.
• Providing for the future such as childcare, further education or an inheritance. 
• Living costs and daily expenses.

Are There Any Alternatives to Life Insurance?

• • Self-funding: building up savings in a dedicated account or having an investment portfolio for your family and dependents.
  • Funeral insurance: dedicated insurance that covers your funeral expenses.
  • Whole of Life and Endowment Policies: long-term policies that have a savings component and build up over time. 
  • Family Protection insurance: this policy pays your family a tax-free monthly benefit rather than a lump sum for a specified period of time after you have passed away. 

If you are unable to work due to a serious illness (even if you are expected to fully recover), are injured or become permanently disabled then other insurances can help with mortgage repayments, income loss and paying for medical bills and daily expenses, these include: 

Income Protection Insurance 

Trauma or Critical Illness Insurance

Total and Permanent Disability Insurance 

Mortgage Protection Insurance.

How Much Life Insurance Do I Need?

This is very much a personal choice and you can choose how much cover you want to take out and how much your beneficiaries would receive but there are a few key factors worth considering to ensure that your policy is sufficient to cover your financial needs.

• The cost to cover funeral and any other end-of-life expenses.
• How much financial support and day-to-day living expenses you would need if you were unable to work due to a terminal illness. 
• Covering any outstanding mortgage repayments or debts such as credit card bills, so that your family don’t have to pay for them. 
• Providing enough income support for anyone (children, partner, spouse or dependants) who relies on your income.
• Do you want to add on other policies such as trauma/critical illness, disability or income protection insurance?

If you’re considering getting life insurance or you want to check that your existing policy still works for you, get in touch with our insurance advisor, Sunaina Sachdeva.