12 Insurance Myths NZ Busted: What Kiwis Get Wrong | QuoteHub

By QuoteHub Editorial Team · Updated 2026-01-08

Insurance Myths in NZ: 12 Things Kiwis Get Wrong About Insurance

New Zealand has an insurance knowledge gap. Only about 35% of Kiwis hold life insurance, and the country consistently ranks as one of the most underinsured in the OECD. 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"

This is the most persistent insurance myth in New Zealand, and it is also the most wrong.

The Financial Services Council (FSC) publishes annual claims data for New Zealand's major life insurers. The numbers consistently show that the vast majority of claims are accepted and paid. Across the industry, claims acceptance rates typically sit between 92% and 97%, depending on the insurer and the type of cover.

For context, Asteron Life reports a claims acceptance rate of approximately 97%. AIA and Partners Life sit around 92% to 95%. These are not cherry-picked figures. They come from published industry data covering thousands of claims each year.

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: NZ insurers pay between 92% and 97% of all claims. Non-disclosure is the leading cause of declines.

Myth 2: "I'm too young for insurance"

It is easy to feel invincible in your twenties and thirties. Insurance feels like something you will get around to eventually. But waiting has real consequences.

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 can secure $500,000 of life cover for roughly $10 to $14 per fortnight. Wait until 40, and that same cover could cost $17 to $19 per fortnight, or more.

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"

This is one of the most dangerous misconceptions in New Zealand. ACC is an excellent system, but it only covers personal injuries caused by accidents. If you cannot work because of an illness, ACC will not pay you a cent.

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"

Some New Zealand employers provide group life insurance, income protection, or health cover as part of their employment package. This is a great benefit, but it has limitations that are often overlooked.

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"

This myth comes from the fact that insurance is one of the few products people hope never to use. But the value of insurance is not measured by whether you make a claim. It is measured by what happens if you need to and do not have it.

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.

NZ insurers paid out over $2.4 billion in claims in the year to September 2025, according to FSC data. 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. A 30-year-old can typically get comprehensive income protection for around $30 to $60 per fortnight, depending on their occupation and the level of cover.

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"

Many New Zealanders assume that a pre-existing health condition automatically disqualifies them from getting insurance. This is not the case.

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 an authorised 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?
Start a free insurance check with QuoteHub. Our authorised advisers can assess your situation and find the insurer most likely to offer you cover on the best available terms.

Myth 7: "All insurance policies are the same"

This myth can be expensive. Life insurance, income protection, trauma, health, and TPD policies vary significantly between providers. The differences are in the details, and those details matter most at claim time.

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"

Price matters, but the cheapest policy is not always the best value. A lower premium might reflect a narrower definition of disability, a shorter benefit period, fewer included benefits, or more restrictive claim conditions.

The real cost of insurance only becomes apparent when you need to claim. A policy that costs $10 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.

An authorised 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"

Having savings is a good thing, but it does not replace income protection insurance. The question is not whether you have savings. It is whether your savings can replace your income for as long as you might need it.

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"

Some banks offer basic life insurance or income protection as part of their mortgage package. While this is better than no cover at all, bank insurance has significant limitations.

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 authorised 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 an authorised 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"

This myth is related to Myth 6 but goes further. Some people avoid applying for insurance entirely because they assume any health issue, no matter how minor, will disqualify them or make cover unaffordable.

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"

Getting insurance is an important first step, but it is not a set-and-forget decision. Your life changes, and your insurance should change with it.

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.

When did you last review your insurance?
Get a free insurance check with QuoteHub. An authorised 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. Published data from the Financial Services Council shows that NZ life insurers accept between 92% and 97% of claims, depending on the insurer. 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 an authorised 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 an authorised 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

  1. Financial Services Council New Zealand. Life Insurance Claims and Membership Statistics, Year to September 2025.
  2. OECD. Insurance Statistics and Coverage Data, 2024.
  3. Asteron Life, AIA New Zealand, Partners Life, Fidelity Life. Published Claims Acceptance Rates, 2024-2025.
  4. Accident Compensation Corporation. Annual Report 2024-2025.
  5. 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 an authorised financial adviser.

QuoteHub connects New Zealanders with authorised financial advisers. QuoteHub holds Financial Service Provider registration (FSP 712931). All advisers in our network hold their own authorisations and are bound by their respective 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.

Explore related pages: Life Insurance, Income Protection, Health Insurance, Trauma Insurance.