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

Life insurance as an asset or an investment: NZ differences

In New Zealand, the life insurance policies we read are risk protection, not investments. Momentum's Quick Life wording states that the policy has no cash value, and AIA's wording gives no surrender value. If you cancel or stop paying, the cover ends and no money is refunded, apart from set free-look and early-window refunds. The Momentum and AIA policies we read pay on death (and, for Quick Life, on terminal illness). The payout can matter as an asset in an estate or in a separation, but the policy itself builds no savings.

In short

Asset, investment or protection?

An asset is something you own that has a value. An investment is money you put in expecting a return, with the value rising or falling. Protection is a contract where you pay a premium and the insurer pays if a defined event occurs. A life insurance policy is the third. It has legal rights attached, so it is something you own in a legal sense, but while you are alive it generally has no value you can sell or draw on.

Two quotations show how insurers describe it. Quick Life: "This isn't a savings or investment plan - depending on how long you keep the policy, the total premiums you pay might be more than the benefit paid out." Funeral Insurance carries the same warning, and the benefit may not cover the cost of a funeral (Momentum Life: Quick Life Policy Wording, November 2025; Funeral Insurance Policy Wording, 17 August 2023). IFSO's published funeral insurance case says plainly: "It is not a savings product" (IFSO).

What you get back if you stop paying

Cash or surrender value If you cancel or stop paying Refunds the wording describes
Momentum Quick Life None ("no cash value") Cover ends; no refund after the 30-day free look; re-applying restarts the 2-year restriction Full refund in the free look if no claim; premiums refunded if death from a pre-existing condition in the first 24 months with no claim payable
Momentum Funeral Insurance None described; stated to be not a savings or investment plan Cover ends and premiums paid are lost Full refund in the 30-day free look if no claim; all premiums for that person refunded if they die of anything but an accident in the first 24 months
AIA life cover No surrender value Cancel any time in writing Refund if you return the policy within 15 days of receiving the documents and no benefit has been paid or claim made

Source: the wordings linked above and AIA Living umbrella wording v8, read 20 October 2026. We found no policy-loan feature in them. If you hold an older policy bought many years ago, its schedule and wording decide what applies; we have no sourced detail on older terms, so check yours. Our whole life guide explains how whole of life cover works and our term versus whole life page compares the structures.

The wordings also say what premiums do. Quick Life premiums are re-set each anniversary for age, gender and smoking status and generally rise each year until 75, then are fixed. Funeral Insurance premiums are fixed each year until the 89th birthday, then stop. See how long you pay premiums.

Where a policy still counts as an asset

In an estate. The proceeds are estate property only if they are payable to the estate; who is paid depends on the policy's ownership and the insurer's terms (Community Law). On Quick Life, the benefit goes to the nominated beneficiary; if none is listed, or they have died, it goes to the policy owner or the estate. Only the owner can nominate or change a beneficiary. On the owner's death, ownership passes to the surviving joint owner, then the beneficiary, then the estate. A Funeral Insurance beneficiary must be a natural person, so the benefit cannot be paid directly to a company, charity or funeral director. Where the estate receives the money, an insurer may pay sums of up to $40,000 to the administrator without a court grant; see probate in New Zealand.

In a separation. Under the Property (Relationships) Act 1976, the share of a life policy's value or proceeds attributable to the relationship is relationship property (s 8(1)(g)), unless a third person is beneficially entitled. The court can make orders about policies (s 30), and nothing divides automatically (Property (Relationships) Act 1976). Because term cover has no value while you are alive, the practical question is usually who owns it and who should be paid, so get legal advice.

For benefit tests. Work and Income's Funeral Grant assessment treats life insurance proceeds as a cash asset (Work and Income: definition of assets). See the funeral cost guide.

Transferring ownership. Quick Life ownership can be transferred to someone who is at least 16, using a transfer form. The wording lists a policy owner's immediate family, limited to parents or siblings, as possible owners with the insured's consent. It does not list a trust, so we do not say a trust can own Quick Life.

Tax on the payout and on the premiums

IRD says "Generally, insurance payouts are excluded income", with income protection payouts that replace lost income generally taxable (IRD: Insurance payouts). We write "generally not taxable income" rather than "tax-free", because the rules differ by product and by who owns the policy. For an employer-owned term life policy, IRD's QB 18/03 says death claims are not taxable income of the employee or the estate, while the premiums are deductible to the employer but subject to fringe benefit tax (IRD QB 18/03). Trauma payouts are not named in QB 18/04, so we do not call them tax-free. This is general information, not tax advice.

For premiums, IRD's list of claimable non-business expenses names income protection insurance if the payout would be taxable, and no life or funeral premium (IRD: Non-business expenses). Life and funeral premiums are generally not claimed, but ask IRD or your accountant. See life insurance and tax.

Is life insurance a good investment?

Judged as an investment, it is not designed to be one. You pay a regular premium; the insurer pays only if the event occurs. If you never claim, the money bought cover and nothing else. That is not a flaw; it is how protection works. A savings account or a managed fund holds a balance you can draw on while you are alive. A protection policy does not.

The honest way to use the two is together: insurance to protect against what you cannot afford to lose, and savings or investments for goals you can plan for. Which mix suits you depends on your debts, dependants and risk appetite, and a licensed adviser can look at it with you. For funeral costs, Consumer NZ lists setting money aside as one of the ways to pay (Consumer NZ). Our funeral cover calculator and high net worth life insurance page look at how cover fits a larger balance sheet, and how a $1 million payout works covers large benefits.

Comparing the structures

Scope. Compared: Momentum Quick Life, Momentum Funeral Insurance and AIA life cover, on cash value, refunds, ownership and payout, as at 20 October 2026, from their wordings. Not every NZ insurer is included. This is one adviser team's reading, not a score.

What your premium buys is shaped by each plan's early window. On Quick Life, a death or terminal illness linked to a pre-existing condition, and suicide or intentional self-harm, are excluded for 2 years; after that, pre-existing conditions are covered apart from specific conditions listed as permanent exclusions in the schedule. Funeral Insurance pays only for accidental death (death within 90 days of the accident) in its first 24 months. Total premiums on a funeral policy can exceed the benefit.

Advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). This is general information, not personal advice. QuoteHub is a Momentum Life partner. Smiths Insurance & KiwiSaver may receive a commission if you buy through our link; see how we are paid. Momentum Life Limited's A.M. Best Financial Strength Rating is B (Fair), in the range Momentum's own table calls "Vulnerable" (Momentum: Financial strength). For Momentum's plans, see the Quick Life plan page.

Frequently asked questions

Is life insurance considered an asset in NZ?

Not in the sense of something you can sell or borrow against, in the policies we read. The policy is a contract with legal rights, and the proceeds can become an asset of an estate or count in a separation or benefit assessment.

Can I cash in a life insurance policy in NZ?

Quick Life has no cash value, and AIA's wording gives no surrender value. You can cancel, but the cover ends and premiums are not returned after the free-look period.

Is a life insurance payout taxable in NZ?

IRD says insurance payouts are generally excluded income, with exceptions such as income protection. Ask IRD or an accountant about your case.

Is life insurance a good investment?

No. It is protection. If you want to build savings, use a product designed for that, and keep insurance for the risks you cannot absorb.

References

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