Back to basics – how does Life Insurance work in NZ

Back to basics – how does Life Insurance work in NZ

Life Insurance pays out a tax-free lump sum if you die or are diagnosed with a terminal illness.

The lump sum will be paid to the policy owner. If you are the policy owner and the life insured, it will be paid to your estate. The money can be used in any way; this could include paying for the funeral, paying off debt or putting it aside for another day. It will be paid in one amount, and for Pinnacle Life policies, usually takes a week or so once we have all the information we need.

You can have your lump sum paid early if you are diagnosed with a terminal illness and your doctor expects you to live less than 6-12 months.

Other questions people have about life insurance in NZ:

Can I cash in my life insurance?

Life Insurance is not an investment or a savings plan, so you can't cash it in. Think of it like your car or contents insurance; you're always glad when you don't have to claim right, as that means nothing has gone wrong.

In the past (a couple of decades ago), you could buy life insurance policies called 'whole-of-life' policies. This is what sometimes causes confusion as whole-of-life policies did have an investment component that could be cashed in. Whole-of-life policies were generally much more expensive. No one sells these kinds of policies in NZ today.

Is life insurance compulsory in NZ?

No life insurance is not compulsory in NZ. And you don't need to have life insurance in place when you take out a mortgage, but it's an excellent idea.

Buying your own home is exciting; it provides a place for you and your family to create memories and provides comfort and safety. Most kiwis need to take out a mortgage to buy a home, and a mortgage is a big financial commitment. The reason life insurance is a good idea is that it means your family could continue to live in your family home (and keep up with everyday expenses) even if you were to die or get ill.

Does life insurance expire?

Life insurance doesn't expire, so as long as you keep paying, you'll be covered.

If you stop paying and cancel your policy, you are no longer covered, and you don't get any premiums back, just like your car, contents, and health insurance policies.

Does it cover suicidal death?

Yes, life insurance policies do cover death by suicide. However, it is typical for policies to not provide cover for suicide for at least the first 13 months. The main reason for this is to make sure that people, who may be thinking about suicide, aren't influenced by the idea that their family will be financially looked after immediately – when the most important thing to the family is having that person around in the future.

Can I get life insurance if I have a disease, an illness or am overweight?

The best thing to do is apply and find out for sure rather than make assumptions. We will assess your situation and health conditions when you apply and let you know your options. Your options might include:

  • being able to get cover straight away
  • needing our underwriters to get a few more details.

Then, we may:

  • accept your application at standard premiums, or
  • ask you to pay a higher premium than the standard (called a loading), or
  • defer your application for up to 12 months.

Doing this assessment at the time of application means there should be no hiccups or delays if you need to make a claim.

Having a health issue shouldn't stop you from applying.

Life Insurance gives you peace of mind that your loved ones will be looked after financially even after you’re gone. At Pinnacle Life we like to keep things as simple as possible. If you’ve got more questions check out our FAQ’s and other blogs.

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Life Insurance

Life Insurance provides for those you leave behind.

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