Term vs whole life insurance — what to choose in NZ

The biggest single choice when buying life cover. Term cover lasts a fixed period (commonly 10/20/30 years) and pays out only if you die during the term. Whole-of-life cover lasts as long as you live and is guaranteed to pay out eventually. The right pick depends on your goal — risk protection during dependent years (term) or estate-leaving / lifetime cover (whole-of-life).

Term life — the straightforward case

Term cover is what most NZ households buy. You select the term length to align with your highest-risk years — typically while you have mortgage + dependents. Premium is much lower than whole-of-life because the insurer only pays out if you die within that term window.

Cheapest at signup. Lower premium than whole-of-life at the same sum-insured.
Stepped vs level option within the term. Stepped rises year-on-year inside the term; level locks for the term then jumps.
Renewable / convertible features. Some terms let you renew without medicals at term-end, or convert to whole-of-life — material if your health declined.
The trade-off: no payout if you outlive the term. Premium spent provides no return.

Whole-of-life — when it makes sense

Whole-of-life cover continues for your entire life and is therefore guaranteed to pay out. The catch: much higher premium for the same sum-insured. Typical buyers: estate-leavers who want a guaranteed inheritance; people with permanent dependents (e.g. a disabled adult child); people uncomfortable with the term-expiry "wasted premium" mental model.

Guaranteed payout. Will pay out eventually.
Higher premium. Often several times the term-life premium at the same age + cover.
Cash-value option on some policies. Some whole-of-life policies build cash value over time, which can be borrowed against or surrendered.

How to decide

Pure risk cover during dependent years → term.
Guaranteed inheritance / estate planning → whole-of-life.
Permanent dependent (e.g. lifelong disability) → whole-of-life.
Budget constrained → start with term; convert later if health permits.

Premium math

We don't publish hardcoded NZ sample-quotes — premiums depend on individual underwriting. The general shape: whole-of-life is materially more expensive than term-life at the same age and sum-insured. The premium gap widens with age. Quote with each insurer for prices applicable to your situation.

See our premium structure topic page for verbatim wording on stepped vs level across NZ insurers.