Under insurance in New Zealand

Life is a precious gift and while none of us like to think about the worst-case scenario, preparing for them is a responsible action that can sometimes be underestimated.  New Zealand has many beautiful attributes that make it a wonderful place, with a vibrant culture and a strong sense of community. However, like any other country, it’s not immune to the uncertainties that life can bring.  This is where insurance can be important.  Offering protection, security and a sense of peace for you and your loved ones.

In this article, we will explore some of the options available, namely life insurance, Total and Permanent Disability (TPD), trauma and income protection insurances, highlighting the features of each and shedding light on some of the risks of going without coverage. 

Life insurance - nurturing your family’s future

Life insurance is more than just a policy; it’s a promise to you and your family that their financial well-being will be safeguarded even if you are no longer there to provide for them. 

If you died, or in many cases if you are diagnosed with a terminal illness and aren’t expected to live for more than 12 months, life insurance could pay out a lump sum which could be used as your family wished.¹ This financial support can help your loved ones maintain their quality of life, covering things like mortgage payments, educational expenses and day to day living costs. 

It's sobering to consider that a significant number of individuals have passed away without adequate life insurance coverage, leaving their families grappling with not only the emotional loss but also the potential financial strain of unpaid debts and ongoing expenses.  Ensuring your family’s future starts with making sure you have a safety net in place, should the need arise. 

Total and Permanent Disability (TPD) insurance – helping to preserve your independence.

Accidents can happen to anyone, anywhere, any time and if you were unfortunate enough to be left permanently disabled and unable to work, the financial challenges could be overwhelming.  TPD insurance provides a lump sum payment if you are deemed to be totally and permanently disabled due to an accident or illness.² This payment can help cover medical expenses, modifications to your home, ongoing care costs and other financial obligations that may arise as a result. 

According to the Financial Services Council NZ, 4 in 5 New Zealanders have not insured their income against sickness or disability. Having TPD insurance can serve as a lifeline for individuals who encounter this situation, offering financial support to help you maintain your quality of life and independence.

Trauma insurance – when sickness or serious injury interrupts your life

No matter how fit and healthy you are, there is always the possibility of a serious health problem. 

Trauma Cover is designed to provide an agreed lump sum if you’re diagnosed with any of the major illnesses or injuries specified in the policy, providing peace of mind that you and your family will be able to cope financially should the unexpected happen.

From helping to pay your medical care to helping to cover your mortgage or household bills, you can choose how best to use your chosen amount, leaving you to focus on the more important things, like your treatment, recovery and spending time with your loved ones.

^{[1] You would need to review the relevant policy wording for the specific terms and conditions and any applicable exclusions that apply.
[2] The policy definition of totally and permanently disabled is relevant and may differ across policies.}

Income Protection insurance - shielding your livelihood

While life insurance can provide essential support for your family in the event of your passing, income protection can offer a safety net should you be unable to work due to illness or injury.  Think about how reliant you and your loved ones are on your income for daily expenses, mortgage payments and future plans.  Now imagine the impact of losing that income suddenly due to unforeseen health challenges.  Income protection insurance can step in to bridge this gap, and can provide a portion of your regular income to help you weather the storm and meet your financial commitments during your recovery period. 

A comprehensive report from the Financial Services Council NZ highlights that around 70% of Kiwis continue to be underinsured, and this can have lasting financial repercussions.  The report emphasises the importance of income protection insurance in helping to prevent families from falling into financial distress due to unexpected health problems.  Income protection insurance is one proactive option to help secure your financial stability and to ensure that your hard-earned lifestyle is not compromised by circumstances outside of your control.

Making informed choices

It’s important to understand the potential consequences of being under or uninsured.  The sobering statistics of those who have passed away without insurance demonstrates the importance of considering whether you and your family are protected. 

It’s essential to research and choose insurance options that align with your specific needs and circumstances.  While this article provides an overview of the options available, it’s highly recommended that you consult with your financial adviser to ensure any coverage you obtain best suits your personal situation.  Remember, the decisions you make today can have a lasting impact on your family in the years to come. 

<sup>Sources:
1. OECD, 2022, Global insurance market trends, Global insurance market trends - OECD
2. Financial Services Council NZ Life Insurance | FSC
3. Financial Services Council (2020).  New Zealanders uninsured and underinsured for death, illness and income loss Gambling on Life - The problem of underinsurance (fsc.org.nz)</sup>

Preparation of this document and the opinions expressed in it may involve material elements of subjective judgement and analysis. Unless specifically stated otherwise: they are current on the date of this document and are subject to change without notice.