Do I need life insurance - and how much cover do I need?

3 min read
6 July, 2023

If the unthinkable happens, life insurance can ease financial stress for your loved ones. Have you got the right cover?

If you were to pass away unexpectedly, those who rely on you would likely have a heavy burden to carry. Life insurance is one way to make life a little easier for them. To help you figure out if you need life insurance, and how much cover is necessary we’ve taken a closer look. 

When should I get life insurance? 

Everyone can get life insurance, but you may want to consider it if you:

  • Have a partner, children or other people who rely on you financially. 
  • Own a business that depends on you to function. 
  • Have a mortgage that you share with someone else. 
  • Don’t want those left behind to pay for your final costs such as a funeral.

If none of these scenarios apply to you, you may still want to seek advice around life insurance. That’s because if you’re free of major health issues you may be able to secure preferred rates and have your insurance ready if your situation changes. 

How does life insurance work?

Most life insurance policies have a shared purpose - to provide a monetary payment to your loved ones if you pass away, with the amount being decided by you (the cover). But when you’re looking to get life insurance, or wanting to see if your current one is still right for you, it’s worth digging deeper to make sure you fully understand your policy. 

Always check your policy to make sure you understand what’s covered and excluded, what the premiums are, how they may increase and how claiming works. And when you’re applying make sure you disclose all relevant information as failure to do so may result in cancellation of your policy or difficulties when it comes to payments being made.

Generally speaking, there are two types of life insurance:

Lifetime insurance

Provides cover for as long as you’re alive but may have restrictions as you age. 

Term life insurance

Provides cover for a set period of time or up until a certain age.

These types of policies may be more affordable than lifetime insurance as it stops at a certain time. When that term is up, there is no more coverage and no benefit is paid.

Some life insurance policies may also include cover in the event that you become permanently disabled or have a separate policy, which is why it's important you choose one you're comfortable with. We encourage you to seek assistance from a trusted financial adviser, insurance broker, legal or other professional advice. 

How much life insurance cover do I need in NZ?

There’s no magical number when it comes to life insurance cover - the amount you need will depend entirely on your circumstances and preferences. To decide what’s right for you, consider how much your dependents or partner may need to pay off debt and continue to enjoy the same or similar quality of life after you’re gone.

These calculations may include:

Many opt to cover the entire amount of their mortgage, while others choose to cover that plus all living costs until their children reach a certain age (for example, when they reach 21 years old).

Once you’ve worked out a number and arranged life insurance, it’s important to review your policy every few years or whenever your circumstances change, such as a property purchase or sale, birth of a child or the start of a new relationship. 

Who can help me choose and give me advice?

The good news is - you don’t have to make all these decisions alone. A financial adviser or insurance broker is an unbiased person who is able to help you figure out how much cover you need, what policy is right for you and help you get it sorted.

Alternatively, you can do your own research using online comparison tools and talk to different providers to ensure you're getting the most out of your life insurance.



This “Do I need health insurance - and how much cover do I need?” blog is general information only. The views and opinions expressed do not necessarily reflect those of the FSC. It is not intended to constitute legal or financial advice and does not take your individual circumstances and financial situation into account. We encourage you to seek assistance from a trusted financial adviser, legal or other professional advice. 

The names of any third parties are additional resources that you access at your own risk and the FSC takes no responsibility for any third party content.  

The FSC and its employees make no express or implied representations or give any warranties regarding this blog, and we accept no responsibility for any loss, damage, cost or expense (whether direct or indirect) incurred by you as a result of any error, omission or misrepresentation in this blog.  

6 July 2023

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