Life Insurance and Terminal Illness Benefit
Life Insurance Cover
Life Insurance cover is something that you put in place for your family so that they will be able to survive financially if you were to die.
You choose how much cover you need and pay a regular premium. If you die while the policy is in force, the insured amount is paid to your family or estate.
Life insurance is commonly used to repay debt such as a mortgage or personal loans, cover funeral costs, and replace the income you would have earned so your family can continue to meet day to day living costs.
All life insurance policies are not created equal
Life insurance policies can include additional benefits beyond the payment made on death. These can vary significantly between insurers and policies.
Common additional benefits may include:
A Terminal Illness Benefit, where some or all of the life insurance is paid if you are certified as terminally ill
Funeral or early payment benefits to help meet immediate expenses
Financial advice or support benefits included in the policy
The wording of these benefits matters. Differences in definitions and limits can affect when and how a policy pays out, and how useful it is in practice.
How much life insurance cover do I need?
This depends on your personal situation.
As a general guide, many people aim to have enough cover to repay all debts on death, plus an allowance for funeral costs. Some people also choose to insure an amount that helps replace lost income for their family for a period of time.
What is appropriate will vary depending on factors such as your debt levels, income, dependants, and whether there is another income in the household.
What do I need to be aware of when I have life insurance?
A life insurance policy will generally only pay out if all of the following apply:
Premiums are paid and up to date.
All relevant information was disclosed at the time of application.
Death does not fall within a specific exclusion period, such as the initial suicide exclusion, which usually applies for the first 13 months of the policy.
Understanding these conditions is important so you know what to expect if a claim is made.
Here are examples of life insurance claims paid in New Zealand across a range of causes
Age | Sex | Cause | Benefit Paid |
27 | M | Accident | $350,000 |
30 | M | Cancer | $32,359 |
30 | F | Accident | $445,391 |
37 | M | Heart Disease | $370,493 |
41 | M | Cancer | $257,315 |
46 | M | Cancer | $1,273,233 |
56 | F | Cancer | $197,315 |
57 | F | Cancer | $500,000 |
59 | M | Stroke | $160,045 |
Terminal Illness Insurance and Benefits (TIB)
Most modern life insurance policies include a Terminal Illness Benefit. This allows the policy to pay out before death if you are certified as having a terminal illness.
The purpose of this benefit is to provide financial support if you are nearing the end of life, allowing you to meet costs, reduce financial pressure, or put affairs in order.
Terminal Illness Benefits are separate from trauma, income protection, and permanent disability insurance. Those insurances are designed to support you financially if you are unable to earn an income, rather than relying on an early life insurance payout.
Accessing a Terminal Illness Benefit usually requires written confirmation from a specialist that life expectancy is limited, often to less than twelve months. This can make the benefit difficult to access in practice.
For this reason, life insurance policies that limit or exclude Terminal Illness Benefits are generally less useful, even if the intention is never to claim under that benefit.
Moneyworks NZ Ltd
P: 0800 225 621
E: contact@moneyworks.co.nz
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Licensed Financial Advice Provider - FSP 15281
Regulatory Information: Moneyworks is a Licensed Financial Advice Provider (FSP15281), and AML Reporting Entity and is supervised by the Financial Markets Authority.