What is Whole of Life, Cash Value and Level Premium insurance?

What is Whole of Life, Cash Value and Level Premium insurance?

Life Insurance has a long history in New Zealand and has been around in the world, in some form or another, since 1706.

Life insurance policies in New Zealand mainly provide cover for personal risk, most commonly in the form of insurance that provides cover for a specified term. Life insurance can be purchased through personal advisers or directly – both online (from Pinnacle Life!) and over the phone.

Because of the long-term nature of life insurance, some older style policies are still active. And, when you ask your parents or older people for advice about cover, they might talk about kinds of policies that are no longer available. This might include:

  • Whole [of] life insurance
  • Cash-value life insurance
  • Level premium life insurance

What's the difference, and why aren't they available?

Whole of Life Insurance

Whole of Life, sometimes called Whole Life Insurance, lasts for the whole of the insured's life as long as premiums are paid and has a savings component and an insurance component. It's sometimes described as permanent insurance.

These types of policies were launched in NZ in the 1950' and were seen as a great way to provide protection while building up an investment asset.

With a whole of life insurance policy, your premium would go three places:

  • towards the cost of your insurance
  • into the savings component
  • towards policy fees and charges.

Due to the savings component, the administration costs tended to be relatively high, making the policies expensive. And if they weren't tied to inflation, returns could be very poor. Eventually, customers realised they could get a better return on their investments by investing in normal investment channels.

With a whole life insurance policy, the premiums and death benefit are fixed for the duration of the policy.

It's now no longer possible to buy whole life policies in NZ, but they remain popular in other countries, particularly in Asia.

Cash Value Life Insurance

Cash Value life insurance also means life insurance with a savings (cash) component. Whole of Life policies are a type of cash value insurance.

Another type of cash value insurance is universal life insurance. Universal life insurance is similar to whole of life but allows you to adjust your premiums and death benefit over time to suit your needs.

There are no types of cash value insurance available in New Zealand.

Level Premium Life Insurance

The key thing about level premium insurance is that you pay the same premium for the duration of your policy.

Level premium insurance is for a fixed term or duration agreed upon when you take out the policy – usually 10, 15, 20, and 30 years. (As opposed to permanent or a whole of life insurance where the policy lasts as long as you pay premiums.) Premiums are usually high compared to other policies when the policy first starts but can start to look like good value for money by the end.

There is no savings component, only a death benefit.

Level premium insurance is available in New Zealand from some providers for short terms such as 5-10 years.



Today you can get the best of both worlds; an insurance policy that’s cost effective and good value for money, and an investment that suits you best with access to expert advice, by doing it yourself.

If you're looking for cover you can buy today; you're in the right place. Pinnacle Life offers renewable term life insurance that you can buy online. Renewable term life insurance is a policy that

  • has no fixed term but renews each year – just like your car insurance
  • has a death benefit only - no cash value.

For more detail - check out the details on our website and get a quote.


sources: https://www.rbnz.govt.nz/research-and-publications/reserve-bank-bulletin/2020/rbb2020-83-01

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