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Term life insurance in New Zealand

Affordable protection: Term life insurance in New Zealand. Secure your loved ones' future. Learn about cover, benefits, and policy selection.

10 min to read

Term life insurance helps protect loved ones in case of an unexpected event, such as death or disability. It provides cover for a specified period and is an essential tool to consider if you have dependents who rely on you financially.

This article is a comprehensive guide to life insurance in New Zealand. We look at its basic features, benefits, and how to choose the policy that best fits your needs. Whether you're a young adult starting your career or a senior citizen planning for retirement, this is for you.


Learn more about different types of insurance from a licenced financial adviser and see what's best for your circumstances.

Health | Life | Trauma | Total and Permanent Disability | Income Protection

What does term life insurance offer?

Life insurance offers several significant advantages, making it an attractive choice for many individuals. Some of those advantages include:

  • Affordability. Since life insurance is a lower risk from the insurer's perspective, the premiums are often more budget-friendly. This accessibility allows individuals to protect their loved ones without straining their finances. Even though the risk of a full claim is low, the potential impact on you and/or your family of not having life insurance in place could be catastrophic. 
  • Straightforward structure. Most life insurance policies are designed to be simple and transparent. Unlike complex policies that cover over 50 conditions, term life insurance focuses solely on providing a death benefit. This straightforward structure makes it easier to understand the terms of cover and helps policyholders make informed decisions with confidence. Most term life insurance policies also provide a full payout if you are deemed terminally ill by your doctor and likely to die within the next 12 months.
  • Financial security. Life insurance offers a lifeline for your loved ones in difficult times, ensuring their financial security after your passing. The policy's death benefit can provide money for whatever you want to spend it on. Typically, it is used to cover expenses such as funeral costs, debts, daily living, and the financial loss of income from the individual who has passed. It provides a safety net, relieving the family of immediate financial obligations, allowing them to grieve without added financial burden and stress.

Most life insurance policies cover you until death providing you continue to pay the premiums. Some life insurance provides cover for a predetermined amount of time with a fixed premium but can be extended as desired. If the policyholder passes away during the insured period, the applicable death benefit will be paid out to the beneficiaries named on the policy. 

It's important to understand that life insurance does not accumulate cash value or offer investment benefits. However, it is a cost-effective way to ensure that your loved ones are financially protected in the event of your passing.

term life insurance

What types of term life insurance policies are available in New Zealand?

In New Zealand, there are various options available which cater to different needs and preferences. The most common types of life insurance are:

  • Level life insurance: A type of life insurance that, according to your chosen sum insured, provides a fixed (‘level’) premium amount of cover for an agreed period of time. Guarantees a consistent payout throughout the term without any decrease in premiums, but at a higher cost compared to other policies; and
  • Stepped life insurance: A type of life insurance that, according to your chosen sum insured, provides a premium that is recalculated each year based on your age at your policy anniversary. This means your premium will increase yearly (‘stepped’), but the policy usually starts with lower premiums than level life insurance. There will be a point in the future where stepped premiums cost more than level insurance premiums.

Have questions about which type of cover is right for you, or want to know how you can fix your premiums so your cover doesn’t go up? Get some advice from one of our licenced Policywise advisers to help you find the best and most cost-effective deal with top life insurance companies in New Zealand.

Disability cover as an add-on to life insurance

For an additional fee, you can add disability cover to your life insurance policy, providing comprehensive protection against unforeseen situations, such as illness or disability.  

Other types of cover that can be purchased and added to your overall life insurance package might include:

  • Trauma cover: Sometimes referred to as critical illness cover, trauma cover provides a lump sum payment if the insured person is diagnosed with a policy-defined critical illness or condition. Trauma cover benefits include up to 50 specified conditions. This cover helps alleviate financial stress during a challenging time and can be used for medical expenses, treatment costs, debt repayment, or lifestyle adjustments.
  • Mortgage or rent protection: This is designed to help a person cover their mortgage, rent, or income obligations in the event of sickness or disablement and if unable to work 10 hours or more per week or perform 75% of their pre-disability tasks.
  • Income protection: Covers up to 75% of your income if you become unable to work more than 10 hours per week or perform 75% of your pre-disability tasks. Similar to mortgage and rent cover, income protection helps maintain your standard of living and manage ongoing expenses.
  • Total permanent disability (TPD) cover: TPD cover provides a lump sum payment if the insured person becomes totally and permanently disabled and is unable to work ever again. The payment can be used for medical expenses, loss of income, rehabilitation costs, home modifications, and other necessities. Policies may have varying definitions of total permanent disability, so reviewing the terms and conditions is essential to understand the eligibility criteria.

Carefully consider your individual needs, financial situation, and future goals when selecting the type of cover most relevant to you.

term life insurance explained

Who needs term life insurance?

While it may not be necessary for everyone, life insurance is highly recommended for those who have dependents or significant financial obligations.

Those who might particularly benefit from life insurance in New Zealand could include:

  • Parents with young children: If you have young children who depend on your income, life insurance can provide financial support and security for them in the event of your unexpected death.
  • Homeowners with mortgages: If you own a home with a mortgage, your family may struggle to keep up with the payments if you were to pass away. Life insurance can help cover these costs.
  • Business owners: If you are a business owner, life insurance can help your business continue to operate smoothly in the event of your death. It could also cover the cost of staff salaries and wages for a period of time.

How much term life insurance cover is necessary?

Determining how much life insurance you really need is critical. Considerations such as your age, health, financial responsibilities, and future obligations can help you work out how much is necessary.

Most insurers recommend taking out cover of at least 10 times your annual income. However, this may not be sufficient if you have significant debts, dependents, or commitments, such as education or mortgage payments.

Tips, factors, and how to avoid simple mistakes when finding the best term life insurance policy

  1. When searching for a life insurance policy provider in New Zealand, it's best to get advice from a reliable insurance adviser who has good reviews. Policywise is a 100% free service which tells you which health, life, and disability insurance provider best fits your needs. We offer fast, comprehensive, and easy-to-understand comparisons of all leading providers, and a simple summary clearly recommending which insurer is best for your situation.

  2. Additionally, it is good to consider the financial strength and reputation of the insurance companies you're researching. Look into their track record, customer reviews, and industry ratings to check that they are reliable and trustworthy. A Policywise adviser can help with this.

  3. Understanding the terms, conditions, and exclusions of a policy is vital before making a decision. Carefully read through the policy documents and ask questions to clarify any uncertainties. Pay attention to details, such as cover duration, renewal options, payout conditions, fine print, and any exclusions or limitations that may apply. Some insurers can exclude medical conditions throughout the application process, so it's important to have an experienced insurance adviser - such as Policywise - onside, who can help negotiate the best outcome.

  4. When choosing a policy, consider your age, health, income, and expenses. These factors are critical in determining the appropriate cover amount and duration. Assess your financial obligations, such as mortgage payments, outstanding debts, and the needs of your dependents. 

  5. While comparing policies and considering factors, try to avoid making simple (and unnecessary) mistakes. People who make the most mistakes with their cover are those who do not engage with an insurance adviser early enough in the process. Policywise has insurance advisers who offer a 100% free service, helping conduct research and comparisons on your behalf so that you can make an informed decision before settling on a policy.

  6. Don’t solely focus on the premium cost. While affordability is essential, it's equally important to evaluate the overall value provided by the policy and the risk of not having any cover. People spend money on house insurance for years on end without claiming and without question but insuring your life and your ability to earn an income which allows you to even own a house is often missed. Look beyond the price tag and consider the cover, benefits, and quality of the insurer you are working with.
  7. Underestimating the required cover amount can also be detrimental. Adequate cover should account for future expenses, such as education costs for your children or the settlement of outstanding debts.

  8. Lastly, make sure that you provide all relevant information to the insurer during the application process. Failing to disclose important details or medical conditions can lead to complications when you make a claim or even the denial of benefits.

how term life insurance works

Policywise is a 100% free service which tells you which health, life, and disability insurance provider best fits your needs. We offer fast, comprehensive, and easy-to-understand comparisons of all leading providers, and a simple summary clearly recommending which insurer is best for your situation.

Not all insurance policies are the same. Policywise can help you sort out the duds, avoid the lemons, understand the fine print and exclusions, and get the right insurance for you and your family.

We make the important decision of where to buy your insurance super easy. We’ll answer your questions, provide experienced advice, quotes, and comparisons, and manage all the back and forth throughout the application process. Taking out your cover through us means you'll have our lifetime support and claims advocacy, and we'll help you negotiate a positive outcome at claim time. We can also take care of lodging any claims on your behalf and back you up if the going gets tough.

Check out the reviews on our homepage for how other New Zealanders have found our service because now is the time to get your life insurance sorted. Give your family or someone you love the most outstanding financial support possible. Book a 5-minute callback with Policywise today; our service is fast and free.


Term life insurance is an essential consideration for individuals and families in New Zealand. By comparing policies, considering personal factors, and avoiding common mistakes, you can create the ideal plan. Don't delay; secure your life insurance today and ensure a protected future. Making an informed decision will provide the necessary financial protection and peace of mind you and your loved ones deserve.

Disclaimer: This article is for general information only. Nothing in this blog or on this website is intended as medical, dietary, or financial advice. Although Policywise aims to update our content regularly, you are advised to consult a financial adviser, health professional, or an appropriate specialist before acting on any information herein. They can factor in your personal circumstances or preferences and help guide your decision-making process.

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Policywise tells you which health, life or disability insurance best matches your circumstances, 100% free. Talk to one of our insurance advisers to find out which health or life insurance is best for pancreatic cancer, and other serious illnesses.


CNN. Johnson, H. (2023). What is term life insurance? Retrieved 30/03/2023

Fidelity Life. (N.D.). What type of life insurance might be right for me? Retrieved 16/06/2023

Forbes Advisor. Danise, A. (2023). What Is Term Life Insurance? Retrieved 07/06/2023

Insurance Information Institute. (N.D.). What are the different types of term life insurance policies? Retrieved 16/06/2023,the%20term%20of%20the%20policy

Investopedia. Kagan, J. (2023). Term Life Insurance: What It Is, Different Types, Pros and Cons. Retrieved 30/03/2023

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