Life insurance is one of those things you don’t think about until you absolutely have to. A new baby, a new mortgage, a health scare, a close call in the family, and suddenly “I’ll sort it later” turns into “I should’ve sorted this ages ago”.
Here are the six most common life insurance mistakes in NZ and exactly how to avoid them.
Putting it off (or not getting life insurance at all)
Life insurance is rarely bought voluntarily. It’s usually triggered by something big, like:
- Buying a home
- Having kids
- Taking on debt
- Watching someone close go through a medical event
But waiting for “the right time” is exactly how most Kiwis end up in trouble. But procrastination can be dangerous in the long run. Your age goes up. Your health goes down. Premiums follow.
The longer you wait, the harder (and more expensive) it becomes to get cover. And if you develop a condition, even a small one, insurers can:
- Load your premiums,
- Add exclusions,
- Or decline cover entirely
By the time people actually want life insurance, it’s often too late for clean, affordable, all-inclusive cover.
How to avoid this mistake:
If someone depends on you financially, partner, kids, elderly parents, or even your own mortgage, get the basics in place early. You can always increase or adjust cover later.
Choosing a number that “sounds right” instead of one that is right
Most people guess the right number. They look at a round number: $200k, $300k, maybe $500k, and think “that should be enough, right?”.
Meanwhile, your mortgage alone might be $600k. Add day-to-day living costs for your family, school fees, debt, and time off work for your partner, and suddenly that “sounds-about-right” number doesn’t stretch far at all.
Common consequences of underinsurance:
- Your family may have to sell the home.
- Your partner may need to go back to work early.
- Kids’ education plans get derailed.
Resultantly, the household is left with long-term financial strain.
How to avoid this mistake:
Start with a simple question: “What does my family truly need to stay secure if my income disappears tomorrow?”
A good adviser will help you calculate mortgage, ongoing living expenses, debts, childcare, funeral costs, and education goals. Your cover amount should match your family’s actual life, not a guess or an online ad.
Not insuring your spouse (especially stay-at-home parents)
This is one of the most harmful and overlooked mistakes in NZ. People often assume, “I’m the one earning the income, so only I need life insurance.”
But here’s the truth: If a non-working partner passes away or falls seriously ill, the financial impact can be massive. Why?
Because a stay-at-home spouse contributes time, not income. If they’re suddenly not there, the working parent may need:
- Time off work
- Paid childcare
- Help at home
- Reduced working hours
And that costs money, often a lot of it.
How to avoid this mistake:
Treat both partners as financially essential members of the household. Even a smaller life/trauma cover for the stay-at-home parent makes a huge difference when the unexpected happens.
Ignoring add-ons, not considering trauma, TPD, or income cover
Most Kiwis think life insurance = death cover. But statistically? You’re far more likely to suffer a serious illness or disability long before you die. That’s where extras matter:
- Trauma/Critical Illness Cover
- Total & Permanent Disability (TPD) Cover
- Income Protection / Mortgage Protection
These benefits can:
- Pay your mortgage while you recover
- Replace income during treatment
- Cover medical costs
- Support family and childcare needs
- Prevent you from burning through savings
Many people skip these because they think “extras = expensive”. But skipping them can leave you exposed in all the situations where you’re alive but unable to earn.
How to avoid this mistake:
Think beyond death. Think: “If I got seriously ill, what would my family need?”
Your adviser can help tailor the right combination instead of stuffing everything into one oversized policy.
Never reviewing your policy
Life changes. Your insurance should change with it. Common life changes that should trigger a review:
- New mortgage
- Higher mortgage
- New baby
- Separation
- Blended families
- New job
- Salary increase
- Major lifestyle changes
- Health changes
- Taking up risky hobbies (motorcycling, mountaineering, diving, aviation, etc.)
Many New Zealanders set up life insurance once and never touch it again. Years later, they find out their cover no longer suits their life, or worse, that they’ve been paying for benefits they don’t need.
How to avoid this mistake:
Review your policy every 12 to 18 months, or whenever your life changes. Most insurers even offer “special events” increases without medical checks.
Buying solely on price
This is the easiest trap to fall into. Life insurance isn’t like petrol or groceries. Two policies at the same price can behave completely differently at claim time.
Cheapest doesn’t mean best. Here are some common problems with cheap policies:
- Weaker definitions of illness
- Fewer built-in benefits
- Limited claim triggers
- Exclusions buried in the fine print
- No trauma/TPD options
- No ability to increase cover easily
- Poor claims support
- Confusing ownership structures
- No flexibility with premiums
And comparing policies yourself? Nearly impossible.
But here’s the part most people don’t realise. Getting life insurance isn’t the hard part. Avoiding the mistakes that make your cover useless? That’s where people get caught out.
Choose value over price. Get an adviser to explain the differences, compare the big NZ insurers properly, and build something that actually works when your family needs it.
FAQs: Life Insurance in New Zealand
Q. Do I actually need life insurance if I’m young and healthy?
Ans : If someone relies on your income, partner, kids, or even your mortgage lender, then yes. Life insurance is cheapest and easiest to get when you’re young. Waiting until you’re older or have health issues only makes it pricier, harder to get approved, and more likely to come with exclusions.
Q. How much life insurance should I have?
Ans : A rough starting point is your mortgage + debts + several years of living costs for your family. But everyone’s situation is different. An adviser can help work out the real number instead of a guess.
Q. Is trauma cover or TPD worth adding?
Ans : Most Kiwis underestimate how common serious illness is. Trauma and TPD cover supports you while you’re alive and unable to work. If losing your income for 6 to 12 months would put pressure on your household, these add-ons aren’t “extras”; they’re essential.
Q. Will my premiums go up every year?
Ans : If you choose stepped premiums, yes, they increase as you age. If you choose level premiums, they stay steadier over the long term but cost more upfront. The right option depends on your budget and how long you expect to keep the policy.
Final Thoughts
Life insurance mistakes don’t show up on Day 1. They show up at claim time when your family is grieving, overwhelmed, and depending on the policy you set up years ago. Here’s what you can do right now:
- Get cover early.
- Choose the right amount, not the default amount.
- Cover both partners.
- Don’t ignore trauma/TPD and income-style benefits.
- Review regularly.
- Don’t buy only on price.
If you’re overwhelmed, confused, or unsure whether your current policy even fits your life anymore, you’re not alone. Most New Zealanders feel this way.
And that’s exactly why advisers exist. Talk to NZ Insurances today. We’ll help you compare options from NZ’s leading insurers, avoid these common mistakes, and build a policy that actually protects your family’s future.
