Let’s be real—life insurance isn’t the most thrilling item on your to-do list. For many Kiwis, it sits somewhere between "I know I should sort this" and "it’s too confusing to tackle." But here’s the thing: getting it wrong—or worse, ignoring it altogether—can have serious consequences for your family’s future. Whether it’s underestimating your coverage needs, choosing the wrong policy, or overlooking key details, making mistakes can leave you financially vulnerable. So, where do people often go wrong? Let’s take a closer look at the most common life insurance mistakes—and how to steer clear of them.
1. The "she’ll be right" approach to coverage
Here’s a sobering fact: 59% of Kiwis are underinsured for life insurance, according to research from the Financial Services Council. One of the most common life insurance mistakes in New Zealand is underestimating how much coverage you really need. A "she’ll be right" approach might mean guessing a number or opting for the minimum, but this often falls short of providing genuine financial security. To avoid this mistake, it’s crucial to calculate your needs based on real-life factors, such as:
Your mortgage balance
Expected childcare costs
Future education expenses
At least 3–5 years of income replacement
Outstanding debts
Are you wondering if life insurance is right for you? Read our blog to learn about the basics of life insurance and why it’s important.
2. Forgetting about income protection
Another common life insurance mistake in New Zealand is overlooking income protection.
While life insurance covers the worst-case scenario, it doesn’t help if you’re unable to work due to illness or injury. That’s where income protection comes in—yet 89% of Kiwis are underinsured for it, according to recent research.
Forgetting about this important cover can leave your family vulnerable to financial strain. Think about it—how would your household manage mortgage repayments, bills, and day-to-day expenses without your regular income? Avoiding this mistake is essential for long-term financial security.
Useful tip: Income protection is crucial to ensure your family’s lifestyle stays intact if you can’t work. It’s designed to replace part of your income, giving you financial stability and allowing you to focus on recovery without worrying about bills or debt.
3. The "set and forget" trap
We’ve talked about forgetting income protection, but here’s another common mistake Kiwis make: assuming the life insurance policy you set up years ago still does the trick. Life changes—and your insurance should, too. Falling into the "set and forget" trap is one of the most common life insurance mistakes in New Zealand and could leave you paying for cover that’s out of date or, worse, not enough to protect your family.
Think about it: Upgrading to a bigger home? That’s a bigger mortgage to cover. Starting a business? You’ve got extra financial responsibilities. Getting married—or divorced? Those changes can seriously shift your priorities. Here are some life events that call for a policy review:
Having children
Buying a bigger home
Career changes
Starting a business
Marriage or divorce
Quick tip: Give your life insurance a check-up every year—or after a major life event. It’s a simple way to stay on top of things and avoid problems at a later date. Want to learn more? Check out our blog on life insurance for different life stages.
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4. Skimming over the fine print
One of the biggest life insurance mistakes is skimming over the fine print. When you take out a policy, it's easy to assume everything is covered. But not all policies are created equal.
Useful tip: Always read the fine print to make sure you're fully covered. Understanding policy exclusions can prevent unexpected gaps in your coverage. With Quashed, you can easily compare life insurance policies and view the policy wordings directly, helping you make an informed decision before you commit.
5. Choosing price over protection
After reviewing the fine print and understanding the exclusions, the next mistake many Kiwis make is focusing too much on price. While it’s tempting to go for the cheapest life insurance policy, price isn’t the only factor to consider. Comparing policies involves more than just premiums. Different insurers offer varying:
Coverage limits
Exclusions
Additional benefits
Claims processes
Health and lifestyle rewards
Tip: Don’t just look at the price. Use Quashed’s real-time comparison tool to see all the important details side by side, helping you make an informed decision. Remember, choosing a policy based solely on price can lead to gaps in coverage and leave your family underprotected.
How Quashed makes it simple
At Quashed, we make finding the right life insurance simple—no matter what stage of life you're in.
With flexible coverage options, you can compare policies side by side, understand the benefits clearly, and make confident decisions—all in one place. With Quashed, you can choose from leading insurers and enjoy exclusive perks such as:
10% off your first year with Pinnacle Life.
Get your first month free and access to AIA Vitality—a health and wellbeing programme that offers fitness discounts, cashback rewards, and more.
Personalised expert advice and support from Partners Life.
Compare life insurance policies today with Quashed.
Further reading
Dive into these handy guides and become an insurance pro in no time:
Choosing Life Insurance: Picking the right cover doesn't have to be a headache.
Life stages & Insurance: Your insurance needs can change thanks to life events.
Life Insurance Costs Explained: No more stressing about what you'll pay.
Money-Saving Tips: Check out these smart strategies for life insurance.
FAQs
What are some mistakes Kiwis make with life insurance?
A big one is underestimating how much cover you need or sticking with a “set and forget” approach. When significant life events occur, it’s worth reassessing your policy to ensure it still meets your needs. Skipping the fine print is another common misstep that can leave you without the protection you thought you had.
Why do some people struggle to get life insurance in New Zealand?
It often comes down to how insurers assess risk. Pre-existing health conditions, high-risk jobs, or even past criminal records can make it harder to get cover. While it might feel disheartening, not all situations are the same—some insurers or brokers specialise in finding solutions for unique circumstances, though availability may vary.
What can you do if you’ve been declined life insurance?
If you’ve been declined, don’t lose hope. Start by asking why—it could be something as simple as incorrect information on your application. From there, explore other providers or policies. While not all applications may result in coverage, some insurers focus on higher-risk clients, and a good broker can help you find suitable options.
What should you know about disclosing past health or legal issues when applying for life insurance?
Honesty is key. Insurers rely on your full disclosure to assess your risk and provide cover. While it might feel daunting, not every detail will disqualify you. Keep in mind that different insurers assess risks differently—some may focus only on recent issues or specific concerns.
What happens if life insurance premiums are too expensive?
If premiums feel out of reach, there are ways to adjust. Consider reducing the amount of cover, opting for a shorter term, or revisiting your application details to see if there’s room for improvement. However, any changes must meet insurer criteria and the terms of your policy. It’s also worth comparing multiple providers—prices and options can vary widely.
Are there life insurance options for people with pre-existing conditions?
Yes, but it may require some extra digging. Some insurers specialise in covering people with health conditions, though they might include exclusions or increase premiums. Not all conditions may be covered, but a broker with experience in these cases can help identify your best options.
How can you avoid common pitfalls when buying life insurance?
The best way is to plan ahead. Don’t just grab the cheapest policy—take time to compare cover options, review exclusions, and ensure the policy aligns with your financial goals. Focusing on what provides the best value, rather than just the lowest cost, can save you trouble in the long run.
Is life insurance necessary if you don’t have a mortgage or dependents?
It depends. If no one depends on your income and you don’t have major debts, you might not need it right now. But locking in a small policy while you’re younger and healthier could save you money in the future if your situation changes. Periodically reviewing your needs is important to avoid over-insurance or unnecessary expenses. It’s strongly recommended that you seek financial advice if you have particular queries regarding your financial situation and objectives.
What should you know about life insurance if you’re starting a family?
Starting a family is the perfect time to reassess your cover. Think about how much your loved ones would need if something happened to you—whether it’s replacing your income, paying off a mortgage, or covering childcare costs. Life insurance is about protecting what matters most. For tailored advice, it’s a good idea to consult a financial adviser to ensure you’re adequately covered.
The information provided in this FAQ is for general informational purposes only and does not constitute financial advice. Insurance policies, coverage options, and pricing may vary based on individual circumstances and provider terms. For full details, please refer to our Terms and Conditions and consider seeking professional financial advice to determine the best solution for your needs.
