Insurance Myths in NZ: 12 Things Kiwis Get Wrong About Insurance
New Zealand has an insurance knowledge gap. There were 4 million life insurance covers in force across the country as at 31 March 2026 against an estimated population of 5.35 million (FSC, *Spotlight on Life Insurance*, March 2026 quarter, retrieved 18 August 2026) (covers, not people, because one person can hold several) and the FSC says New Zealand still ranks among the more underinsured OECD markets (Insurance Business NZ, 27 February 2026). Part of the reason is cost. Part is competing priorities. But a significant part comes down to myths and misconceptions that have been passed around for decades.
Some of these myths are understandable. Others are genuinely dangerous, because they lead people to go without cover they actually need. This guide takes 12 of the most common insurance myths in New Zealand and sets the record straight with facts, data, and plain English.
Myth 1: "Insurers never pay claims"
New Zealand insurers pay the large majority of claims. The major insurers' own published claims reports put acceptance rates in the low-to-high 90s, depending on the insurer, the reporting year and the type of cover: Asteron Life 97% for the year to 30 June 2024, Partners Life 95% for the year to 31 March 2025, Fidelity Life 93% for the year to 30 June 2025, and AIA 91% for the 2025 calendar year (all retrieved 18 August 2026). Declines are almost always caused by non-disclosure.
Each of the major New Zealand life insurers publishes its own annual claims report. The numbers consistently show that the vast majority of claims are accepted and paid, with the exact rate varying by insurer, by reporting period and by type of cover.
For context, Asteron Life paid out on 97% of the Trauma, Life and Income Protection claims it received between 1 July 2023 and 30 June 2024 (Asteron Life media release, 11 December 2024), Partners Life paid 95% of all claims it assessed between 1 April 2024 and 31 March 2025 (*This is Partners Life 2025* claims brochure), and AIA accepted 91% of all claims received in the year ended 31 December 2025 (riskinfonz, 12 May 2026). All retrieved 18 August 2026. These are not cherry-picked figures; they come from the insurers' own published claims reporting.
The small percentage of claims that are declined are almost always due to non-disclosure, meaning the policyholder did not accurately disclose their health history or relevant information when they applied. This is why honesty during the application process matters so much. If you disclose everything upfront, your claim is overwhelmingly likely to be paid.
The fact: the major NZ insurers publish acceptance rates in the low-to-high 90s. Non-disclosure is the leading cause of declines.
Myth 2: "I'm too young for insurance"
Nobody is too young for insurance in New Zealand, because premiums are priced partly on your age at the time of application and cover taken out in your twenties costs less than the same cover taken out at 40. Getting covered while you are young and healthy also locks in insurability, since a condition diagnosed before you apply can be excluded from future cover.
First, insurance premiums are based partly on your age at the time of application. The younger and healthier you are when you apply, the cheaper your premiums will be. A 25-year-old non-smoker taking out $500,000 of life cover locks in a rate near the bottom of the curve. Wait until 40, and the same cover costs noticeably more for no extra benefit.
Second, health can change unexpectedly. If you develop a medical condition before you have insurance, that condition may be excluded from future cover, or it may make insurance more expensive or harder to obtain. Getting cover while you are young and healthy locks in your insurability.
Third, serious illness and accidents do not only happen to older people. Cancer, mental health conditions, and accidents can affect anyone at any age. Income protection claims from people in their twenties and thirties are not uncommon.
The fact: Getting insurance young means lower premiums, fewer exclusions, and protection during the years when you are building your career and taking on financial commitments like a mortgage.
Myth 3: "ACC covers everything"
ACC does not cover everything, because it only covers personal injuries caused by accidents. Cancer, heart disease, stroke, mental health conditions unless linked to a physical injury, and degenerative conditions all sit outside ACC in New Zealand. ACC also caps weekly compensation at 80% of pre-injury earnings up to a maximum threshold, and pays no lump sums for serious diagnoses.
Cancer, heart disease, stroke, mental health conditions (unless linked to a physical injury), and degenerative conditions are all outside ACC's scope. These are the conditions most likely to stop you from working for an extended period.
ACC also caps weekly compensation at 80% of your pre-injury earnings, up to a maximum threshold. For higher earners, this cap can leave a significant shortfall. And ACC does not provide lump sum payments for serious diagnoses the way trauma insurance does.
For a detailed breakdown of what ACC does and does not cover, see our guide on what ACC does not cover in 2026.
The fact: ACC covers accidents only. Illness, which causes the majority of long-term work absences, is not covered at all.
Myth 4: "My employer provides enough cover"
Employer-provided cover in New Zealand is rarely enough on its own. Group life insurance, income protection or health cover as part of an employment package is typically a fixed multiple of salary, often one or two times annual income, against a common recommendation of eight to ten times income for life cover alone, and it ends when the job ends.
Employer-provided cover is typically a fixed multiple of your salary, often one or two times your annual income. For someone with a mortgage, dependants, and other financial obligations, this is rarely enough. A common recommendation is cover of eight to ten times your income for life insurance alone.
More importantly, employer cover ends when your employment ends. If you are made redundant, change jobs, or become self-employed, your cover disappears. If your health has changed since the group policy was arranged, you may find it difficult or expensive to replace that cover with a personal policy.
Group policies also tend to offer less flexibility. They may not include the same level of benefits, optional extras, or policy features that individual policies provide. And you typically have no control over the insurer, the terms, or the structure of the cover.
The fact: Employer cover is a bonus, not a replacement for personal insurance. It is usually insufficient in amount and disappears when you leave the job.
Myth 5: "Insurance is a waste of money"
Insurance is not a waste of money, and the clearest evidence is what gets paid out: New Zealand insurers paid $1.368 billion in life claims and $2.545 billion in health claims in the year to September 2025 (FSC State of the Sector report, reported by Insurance Business NZ, 27 February 2026, retrieved 18 August 2026). The value of a policy is not whether you claim, but what happens to your mortgage, bills and savings if you need to and cannot.
Consider a household where the primary earner develops cancer and cannot work for 12 months. Without income protection, that family needs to survive on savings, the partner's income (if any), and whatever government support is available. The financial stress compounds the health stress.
With income protection, up to 75% of the earner's income continues to be paid, covering the mortgage, bills, and day-to-day costs while they focus on recovery.
That money went to real families dealing with real crises. For those families, insurance was the opposite of a waste.
The cost of insurance is also lower than most people expect. For a 30-year-old, comprehensive income protection usually comes in below what people guess before they get a quote, and the price turns mainly on occupation class, the level of cover, and the waiting period chosen.
The fact: Insurance is a financial safety net. Its value is in the protection it provides against events that would otherwise be financially devastating.
Myth 6: "I can't get insurance with pre-existing conditions"
A pre-existing condition does not stop you getting insurance in New Zealand. Insurers underwrite each application individually and may offer standard terms, cover with a specific exclusion, cover at a higher premium through a loading, or in some cases a decline. Conditions such as asthma, anxiety, high blood pressure and high cholesterol are frequently insured on standard or near-standard terms.
Insurers assess each application individually through a process called underwriting. Depending on the nature and severity of your condition, you may be offered cover on standard terms, cover with specific exclusions (for example, a back condition excluded from an income protection policy), cover at a higher premium (a loading), or in some cases, a decline.
The key point is that having a pre-existing condition does not mean automatic decline. Many people with conditions like asthma, anxiety, high blood pressure, high cholesterol, or a history of minor injuries are insured on standard or near-standard terms.
Different insurers also assess conditions differently. One insurer may apply an exclusion where another offers standard terms. This is one of the main reasons working with a licensed financial adviser is valuable. An adviser who knows the underwriting approaches of different insurers can place your application with the insurer most likely to offer you favourable terms.
For more detail, read our guide on life insurance with pre-existing conditions.
The fact: Pre-existing conditions do not automatically prevent you from getting insurance. Many conditions are covered on standard or modified terms.
Have a pre-existing condition and not sure where you stand?
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Myth 7: "All insurance policies are the same"
Insurance policies are not all the same, and life, income protection, trauma, health and TPD cover vary significantly between New Zealand providers. Income protection policies differ most in how disability is defined, with own occupation cover paying when you cannot perform your specific job and any occupation cover paying only if you cannot perform any job you are reasonably suited to.
For example, income protection policies differ in how they define disability. Some policies use an "own occupation" definition, meaning you are covered if you cannot perform your specific job. Others use an "any occupation" or "suited occupation" definition, which means you are only covered if you cannot perform any job you are reasonably suited to. The difference between these definitions can determine whether your claim is accepted or declined.
Other differences include benefit periods (how long the insurer pays), waiting periods (how long before payments start), whether the policy covers partial disability, rehabilitation benefits, and how premiums are structured (stepped versus level). For a comparison of how NZ life insurers stack up, see our guide to the best life insurance in NZ.
The fact: Policies differ in definitions, benefit periods, exclusions, and features. Reading the fine print, or having an adviser explain it, is essential.
Myth 8: "I should just pick the cheapest"
Picking the cheapest policy is not the same as picking the best value, because a lower premium in New Zealand often reflects a narrower definition of disability, a shorter benefit period, fewer included benefits or more restrictive claim conditions. Affordability still matters, since a policy you cancel because of cost provides no protection at all.
The real cost of insurance only becomes apparent when you need to claim. A policy that costs a little less per fortnight but declines your claim due to a restrictive definition is not a saving. It is a loss.
This does not mean you should ignore cost entirely. Premiums need to be affordable over the long term, because a policy you cancel due to cost provides no protection at all. The goal is to find the right balance between comprehensive cover and a premium you can sustain.
A licensed financial adviser can help you understand what you are getting for your money and identify where a slightly higher premium buys meaningfully better cover.
The fact: The cheapest policy may have the most restrictive terms. Value matters more than price alone.
Myth 9: "I don't need income protection if I have savings"
Savings do not replace income protection, because the average income protection claim in New Zealand lasts approximately 18 months to two years, and claims involving mental health conditions, chronic illness or serious injury run longer again. Most households would exhaust their savings within a few months, wiping out money set aside for retirement, education or a house deposit.
The average income protection claim in New Zealand lasts approximately 18 months to two years. Some claims, particularly those involving mental health conditions, chronic illness, or serious injuries, last much longer. Could your savings cover your mortgage, household expenses, and family costs for two or more years without any income coming in?
Most people's savings would be exhausted within a few months. And once those savings are gone, they are gone. Years of careful saving can be wiped out by a single extended period of illness or injury.
Income protection insurance preserves your savings for their intended purpose, whether that is retirement, your children's education, or a deposit on a property, while providing a dedicated income stream during the period you cannot work.
The fact: Savings run out. Income protection provides a sustained income for as long as you are unable to work, up to the benefit period of your policy.
Myth 10: "Insurance through my bank is good enough"
Bank insurance is basic rather than good enough. Policies sold with a New Zealand mortgage package tend to have fewer features, less flexibility and more restrictive terms than cover from specialist life insurers, and are often tied to the mortgage balance rather than your household's actual needs. Bank staff are generally not licensed financial advisers.
Bank policies tend to be basic, with fewer features, less flexibility, and more restrictive terms than policies available through specialist life insurers. The cover is often tied to your mortgage balance rather than your actual financial needs, which means it may not account for your family's living expenses, debts outside the mortgage, or future financial obligations.
Bank staff are generally not licensed financial advisers. They may not have the training or knowledge to assess your full insurance needs, compare options across the market, or recommend the most appropriate cover for your situation.
You are also limited to the bank's chosen insurer, which may not be the best fit for your health profile, occupation, or cover requirements.
The fact: Bank insurance is basic and limited. A standalone policy through a licensed adviser typically offers better cover, more flexibility, and terms tailored to your actual needs.
Myth 11: "I need to be in perfect health to get insurance"
Perfect health is not required to get insurance in New Zealand, and insurers expect applicants to have some health history. Mild asthma, controlled high blood pressure, treated and stable anxiety or depression, previous injuries that have healed and routine medications are assessed every day by NZ insurers, and many applications result in standard cover or minor adjustments.
In reality, insurers expect applicants to have some health history. Most adults have visited a doctor, had tests, or been prescribed medication at some point. The underwriting process is designed to assess risk, not to find reasons to decline.
Common conditions like mild asthma, controlled high blood pressure, a history of anxiety or depression that has been treated and is stable, previous injuries that have healed, and routine medications are assessed every day by NZ insurers. Many of these result in standard cover or minor adjustments.
The important thing is to apply honestly and disclose everything. Underwriters assess what you tell them. If you are upfront, they can make a fair assessment. If you withhold information, you risk having a future claim declined.
The fact: You do not need perfect health to get insurance. Most people with common health conditions are accepted on standard or modified terms.
Myth 12: "Once I have insurance I never need to review it"
Insurance needs reviewing as your life changes, not once at purchase. New Zealanders should reassess cover after marriage or a new partnership, having children, buying a home or increasing a mortgage, changing jobs or becoming self-employed, a pay rise, separation, paying off significant debts, and approaching retirement, with an annual or biennial adviser review in between.
Common life events that should trigger an insurance review include getting married or entering a partnership, having children, buying a home or increasing your mortgage, changing jobs or becoming self-employed, receiving a pay rise, getting divorced or separated, paying off significant debts, and approaching retirement.
If your cover does not reflect your current circumstances, you may be underinsured (not enough cover for your actual obligations) or overinsured (paying for cover you no longer need).
New products, improved policy features, and changes in the insurance market may also mean that better options are available than when you first took out your cover. An annual or biennial review with your adviser ensures your insurance stays aligned with your life.
For guidance on when and how to review your cover, see our article on reviewing your insurance.
The fact: Insurance needs change as your life changes. Regular reviews ensure your cover remains appropriate and cost-effective.
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Get a free insurance check with QuoteHub. A licensed adviser will review your current cover and let you know if there are gaps or savings to be found.
The Bottom Line
Insurance is not complicated, but it is surrounded by misinformation. The myths in this guide lead people to delay getting cover, choose the wrong policies, or go without protection entirely. In every case, the people who suffer most are the families who find out the hard way that their assumptions were wrong.
The facts are straightforward. NZ insurers pay the vast majority of claims. Young people benefit most from getting cover early. ACC does not cover illness. Employer and bank insurance are not enough. Pre-existing conditions do not automatically disqualify you. And the cheapest policy is not always the best.
If any of these myths have been holding you back from sorting your insurance, the best next step is to get an honest assessment of where you stand.
Frequently Asked Questions
Do NZ insurers actually pay claims?
Yes. The major insurers publish their own claims data: Asteron Life paid 97% of the Trauma, Life and Income Protection claims received in the year to 30 June 2024, Partners Life paid 95% of claims assessed in the year to 31 March 2025, Fidelity Life accepted 93% of claims received in the year to 30 June 2025, and AIA accepted 91% of claims received in the 2025 calendar year (all retrieved 18 August 2026). The most common reason for claim decline is non-disclosure, where the policyholder did not accurately disclose their health or lifestyle information at the time of application.
What is the biggest gap in ACC coverage?
Illness. ACC covers personal injuries caused by accidents, but it does not cover illness of any kind. Cancer, heart disease, stroke, mental health conditions (unless caused by a covered physical injury or sexual violence), and degenerative conditions are all outside ACC's scope. This means if you cannot work due to illness, you will receive no income support from ACC.
Can I get insurance if I have a pre-existing condition?
In most cases, yes. Insurers assess each application individually. Depending on your condition, you may receive standard terms, an exclusion for the specific condition, a premium loading, or in some cases, a decline. Different insurers assess the same condition differently, so working with a licensed financial adviser who understands each insurer's approach can improve your outcome.
How often should I review my insurance?
At minimum, every two years, or whenever you experience a significant life change such as having a child, buying a house, changing jobs, or getting married. An annual review with your adviser is the simplest way to ensure your cover still matches your circumstances.
Is insurance through my bank enough?
Generally, no. Bank insurance tends to be basic, with limited features and restrictive terms compared to policies from specialist life insurers. Bank cover is often tied to your mortgage balance rather than your actual financial needs and may not account for living expenses, other debts, or family obligations. A standalone policy arranged through a licensed adviser typically provides better and more flexible cover.
Why is insurance cheaper when you are young?
Insurance premiums are partly based on your age and health at the time of application. Younger people have a statistically lower risk of serious illness and death, which translates to lower premiums. Getting cover while you are young also locks in your insurability, protecting you against future health changes that could make cover more expensive or harder to obtain.
References
- Financial Markets Authority (FMA), Insurance guidance
- ACC New Zealand
- Sorted.org.nz, Insurance guides
- Insurance & Financial Services Ombudsman (IFSO)
- MoneyHub NZ, Insurance resources
- Cancer Society of New Zealand
- Heart Foundation NZ
- Mental Health Foundation NZ
- FSC: Spotlight on Life Insurance, March 2026 quarter (retrieved 18 August 2026)
- Insurance Business NZ: Life and health cover anchor New Zealanders' risk protection (FSC State of the Sector) (27 February 2026)
- Asteron Life: Life Insurer of the Year reports 97% claims payout rate (11 December 2024)
- Partners Life: This is Partners Life 2025 claims brochure (claims assessed 1 April 2024 to 31 March 2025)
- Fidelity Life: Claims we've paid customer brochure (1 July 2024 to 30 June 2025)
- riskinfonz: $790m in total claims paid in 2025, AIA NZ (12 May 2026)
- Financial Services Council New Zealand. Life Insurance Claims and Membership Statistics, Year to September 2025.
- OECD. Insurance Statistics and Coverage Data, 2024.
- Asteron Life, AIA New Zealand, Partners Life, Fidelity Life. Published Claims Acceptance Rates, 2024-2025.
- Accident Compensation Corporation. Annual Report 2024-2025.
- Insurance Council of New Zealand. Consumer Research and Market Data, 2025.
Disclaimer
The information in this article is general in nature and does not constitute personalised financial advice. It is intended to help you understand common insurance misconceptions in New Zealand and should not be relied upon as a substitute for advice from a licensed financial adviser.
QuoteHub connects New Zealanders with licensed financial advisers. Financial advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). QuoteHub is a trading name. Advisers in our network operate under a licensed Financial Advice Provider and are bound by their own disclosure obligations.
Insurance needs vary by individual. Cover amounts, premiums, and policy terms depend on your personal circumstances including age, health, occupation, and income. We recommend obtaining personalised advice before making any insurance decisions.
Claims acceptance rates, premium figures, and other statistics cited in this article are based on the most recent publicly available data at the time of publication. These figures are subject to change. Always confirm current data with the relevant insurer or your financial adviser.
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