How Much Life Insurance Do You Need in NZ?

Life insurance exists to replace the financial role you play in your family if you die. The right number is the one that lets the people you love keep the same roof, the same routine and the same opportunities — not a generic multiple of salary.

Start with the four buckets

• Debts — mortgage, personal loans, credit cards, anything that would otherwise fall on your family.
• Income replacement — your annual contribution multiplied by the years your dependants would still need it.
• Children's costs — childcare, education, and the practical cost of running a household without you.
• Final expenses — funeral, legal, and a buffer for the months following.

Subtract what's already there

From that total, subtract existing cover (employer group cover, KiwiSaver, life cover already in place) and any liquid assets your family could reasonably draw on. The remainder is roughly the gap a new policy needs to fill.

Don't over-insure

Paying for more cover than your dependants actually need is just a higher premium with no extra protection. As the mortgage shrinks and the kids leave home, your cover should come down too. Many policies allow you to reduce the sum insured without re-underwriting.

Term, not whole-of-life

For most New Zealanders, level or yearly-renewable term life is the right tool. Whole-of-life products bundle investment and insurance, usually expensively. Keep insurance for protection and use KiwiSaver or other accounts for investing.

Key takeaways

• Calculate cover from real obligations, not salary multiples.
• Subtract existing cover and liquid assets before quoting.
• Reduce cover as debts shrink and dependants grow up.
• Stick to term life — keep insurance and investing separate.

Compare current life insurance options on MoneyGuru, and pair this with income protection if you're the household's main earner.