Date posted: 27/03/2023 5 min read

NZ underinsurance becoming ‘critical’

A government report has revealed many Kiwis have inadequate cover and are taking a big financial risk. Brought to you by PinnacleLife.

Less than a third of New Zealanders have taken out life insurance or private health policies, with many put off by rising premiums or confused about the benefits, a 2022 report by the Financial Services Council found.

Only 8% of the population have critical illness cover, meaning their families could face financial strife if the main breadwinner becomes seriously ill and can no longer work.

The research echoes findings from a 2021 Swiss Re Institute study that warned New Zealanders are underinsured to the tune of $500 million, and are ‘vulnerable to financial hardship in the event of the premature death of the primary earner’. It describes the situation as ‘critical’, particularly among the young and middle-aged professionals.

Five common mistakes lie behind the shortfall, according to Jane Barron, Pinnacle Life’s marketing, and technology manager…

1. It won’t happen to me!

“No one wants to think about dying early, having a serious accident or becoming ill, so it’s easy to put off taking out a policy,” she says. “But doing so could have very profound consequences if the worst does happen.”

2. Not updating policies

The appropriate amount of life insurance or trauma cover will change as an individual’s circumstances change, so it’s vital they consider their life insurance needs when they get married, take out a mortgage, have a family or become empty nesters. “Updating a policy regularly means you can rest assured that you have enough cover, and that you’re not paying for insurance you don’t need,” Barron says.

3. Assuming ACC provides cover

ACC does provide protection against accidents, but many people don’t realise that it doesn’t cover loss of work due to illness or disease. One recent study found that such misconceptions mean that a third of households overestimate how prepared they are for a bereavement or life-changing accident. When such an event occurs, having to sell their house or move to a different area can add to an already stressful situation.

4. Leaving it too late

Young people are far more likely to insure their cars, jewellery or gadgets than their own lives, but there are risks attached to deciding to delay taking out such policies. “There can be a tendency to think that life insurance and critical illness are things you don’t have to worry about until you’re in your 40s or 50s,” Barron says. “But that can be a false economy as beginning a policy later on may mean it ends up being more expensive, because by then you are more likely to have health conditions that will increase your premiums.”

“There can be a tendency to think that life insurance and critical illness are things you don’t have to worry about until you’re in your 40s or 50s.”
Jane Barron, Pinnacle Life

5. Ignoring the small print

Policies can differ widely in what they cover. “As with any insurance, it’s really important to look at exactly what’s covered so you can decide if you want to pay extra for diseases that don’t occur very often.” Barron says. “For example you may be able to save money if your policy covers New Zealand’s most common conditions such as cancer, strokes and heart disease, and doesn’t include very rare ailments.” 

Find out more

Pinnacle Life is the New Zealand life insurance partner of the CA ANZ Member Benefits Program. Visit for information about the benefits available to CA ANZ members

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