Seven out of 10 Kiwis are underinsured

May 3, 2023

Do you have enough insurance for your biggest asset?

If you’re like many New Zealanders, you probably answer this question by saying: “Yes, my house is fully insured.” But while New Zealanders are generally really good at insuring their houses, cars, and other physical belongings, for many of us they aren’t our biggest assets.

That title goes to our incomes – and many aren’t always adequately insuring them at all.

How much of a problem is there?

Research by the Financial Services Council found that 70% of New Zealanders were underinsured when it came to their life and health insurance – even if they had some cover, it was not enough to really meet their needs.

If something unexpected were to happen, they wouldn’t necessarily have the financial safety net available to them that good, well-structured insurance protection can provide.

In total, 80% of New Zealanders had not insured their income against the financial loss associated with sickness and disability at all. Just under 40% had life insurance, 32% had health insurance, 18% had some form of trauma cover, 11% had insured their income and 14% had total and permanent disability cover.

Why does it matter?

If you’re insufficiently insured, you could be exposed to significant financial risk.

The same FSC report found that most people who took out personal insurance did so for the peace of mind it offered them, or to reduce their worries about financially looking after family members if they were no longer able to.

While insurance is the kind of purchase you hope you never have to use, New Zealanders do claim regularly on their policies. FSC estimated there were $300 million of claims on life insurance in the March and June quarters of 2022. And health insurers paid out more than $3.9 billion in claims in the year to June 2022.

Insurance can step in to make sure the important bills are paid, or there is money for your your loved ones to meet their living costs, even when life is turned on its head.

What (appropriate) insurance can offer you

That peace of mind that a solid insurance plan offers cannot be overstated.

Insurance can be important to keep you on track at all stages of life – whether you’re in the accumulation stage and need some income protection to be sure that you can hit your goals, or if you’re comfortable but want health cover to make sure you have some flexibility in your healthcare choices, to help maintain your lifestyle.

And remember: insurance isn’t something you can set and forget. Even if you have good cover in place, it’s important to check in with your adviser regularly to ensure that it’s keeping up with your changing life.

What stops people having enough?

The FSC data showed that worries about the cost of insurance were getting in the way of some people having sufficient cover. But the cost of not having appropriate insurance can be enormous, and there are many ways that insurance cover can be tailored to fit different budgets. We can advise on this.

Like to talk?

Maybe it’s time to check whether your existing cover is appropriate for your needs, or to put some new policies in place. Whatever your situation or life circumstances, we can help you design an insurance portfolio that will provide you with priceless peace of mind. Get in touch with us if you’d like to discuss your options.

The information contained in this publication is intended for general guidance and information only. It has not been personally prepared for you. Therefore, you should not act on this information if you have not considered the appropriateness of this information to your personal objectives, financial situation and needs. You should consult with us before making any investment decision. Historical market performance may not be indicative of future market performance.