Written by · Reviewed by Smiths Insurance & KiwiSaver — licensed Financial Advice Provider (FSP712931) · Last updated 2026-10-20

Decreasing term life insurance in NZ

Decreasing term life insurance is cover where the amount paid on death falls over the policy term, most often to follow the balance of a repayment mortgage. It differs from level cover, which pays the same sum for the whole term. In New Zealand we found no insurer page or policy wording that describes a decreasing term product, so ask a licensed adviser what the insurers you are considering will actually do.

In short

What decreasing term cover is

Decreasing term life insurance is a life policy for a fixed term in which the sum insured reduces on a schedule, for example each year. The idea is to match cover to a debt that shrinks. If the insured person dies, the insurer pays the sum that applies on that date.

Level term cover, by contrast, keeps the same sum insured across the term. If the loan has fallen by the time of death, a level policy pays more than the loan, and the surplus goes to the beneficiaries. Whether that is waste or a benefit depends on what else the family needs. The mortgage is rarely the only cost; see mortgage life insurance and life insurance versus mortgage protection for the wider picture.

A worked example: a 30-year repayment mortgage

The table is a calculation of ours, not an insurer figure. It assumes a $600,000 loan at 6.0% a year over 30 years, repaid monthly with principal and interest (a repayment of about $3,600 a month). The rate is only an example, not a forecast, and an actual loan will differ with its rate, fixed terms and any extra repayments.

Years into the loan Approximate balance left Share of the original loan
0 $600,000 100%
5 $558,000 93%
10 $502,000 84%
15 $426,000 71%
20 $324,000 54%
25 $186,000 31%
30 $0 0%

The balance falls slowly in the early years because most of each repayment is interest. A decreasing schedule that cut the sum by a fixed amount each year would be below the real debt for much of the first half of the loan. If you want the payout to follow the loan, the schedule has to be built from the loan's own repayment pattern.

Is it available in New Zealand?

We read the life cover pages and wordings of AIA, Asteron Life, Chubb Life, Fidelity Life and Momentum Life on 20 October 2026. None described a decreasing term product. What they do describe:

An absence on a web page is not proof that an insurer would refuse a request, and insurers may handle changes by adviser request. We cannot tell you what each would do, so this is a question for an adviser.

Ways people approximate it

These are our descriptions of structures an adviser might discuss, not published products, and none comes with a price we can quote:

  1. One level policy, then reduce it. Take level cover sized to the loan and ask the insurer to lower the sum as the loan falls. AIA says this is possible; check the terms and whether the premium falls with the sum.
  2. Several smaller policies. Hold, say, three policies and cancel one as the debt falls. Each one is underwritten when you buy it, and getting cover back later means a new application at your then age and health.
  3. A level sum that you keep. Let the surplus cover other needs: a partner's living costs, children, or funeral and estate costs. The cost is paying for more cover than the loan alone needs.

Whatever you choose, do not cancel existing cover until the new cover is in force. The Financial Markets Authority says to keep the old policy running until the new one starts and to check for new qualifying periods and pre-existing condition exclusions (FMA: Insurance). Premium structure matters too: stepped premiums rise with age while level premiums are set for a period; see level premium life insurance and stepped versus level premiums.

Where Momentum's Quick Life fits

Quick Life is guaranteed acceptance life cover for New Zealanders aged 18 to 65, with a starting sum of $50,000 to $300,000 per life insured. The amount increases 3% each policy anniversary until age 75 or a $500,000 cap, unless you opt out of an increase in a given year. Premiums are stepped, so they rise each year until 75 and are then fixed. The wording sets no decreasing schedule; it does say you can ask in writing to increase or decrease your life benefit, and an increase is treated as a new policy with its own start date, terms and premium.

For a large mortgage, the $300,000 starting limit means Quick Life cannot cover a big loan alone. Its first 2 years exclude pre-existing conditions and suicide, so a person with a health condition has no cover for that condition for those two years; acceptance itself is guaranteed, with no health questions. If you cancel and re-apply, the two-year standdown starts again and premiums already paid are not refunded.

A healthy person can usually get more cover for less with fully underwritten cover through an adviser. Momentum Life Limited has an A.M. Best financial strength rating of B (Fair); see its financial strength page. The buttons on this page open Momentum's online application. See the Quick Life plan page and the guaranteed acceptance hub, and for the age at which cover can end, does life insurance expire and surrender value.

General information, not advice. Advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). QuoteHub is a Momentum Life partner, and Smiths Insurance & KiwiSaver may receive a commission if you buy through our link; see how we are paid. Last reviewed 20 October 2026 by the QuoteHub Adviser Team.

Frequently asked questions

Do premiums fall as the cover decreases?

It depends on the product. We found no published New Zealand decreasing-term premium schedule, so we cannot say. Ask for a written illustration.

Does Momentum sell decreasing term cover?

Not as a scheduled product. The Quick Life wording describes a sum that rises 3% a year until 75 or a $500,000 cap, unless you opt out, and no automatic decreasing schedule. It does let you ask in writing to decrease the benefit.

Is level cover better than decreasing cover?

Neither is better for everyone. Level cover pays the same sum throughout and costs more for the surplus. Decreasing cover follows a falling debt but leaves less for other needs.

References

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