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

Residential care subsidy and insurance options in New Zealand

We found no New Zealand insurer selling a product described as residential care insurance. Long-term rest home or hospital care is paid from your own money until your assets fall to the limits for the Residential Care Subsidy, which Work and Income runs. For a single person aged 65 or older, Work and Income's page of 4 August 2026 sets that limit at $300,811 in total assets. Prepaid funeral expenses of up to $10,000 each, held in a recognised funeral plan, are not counted.

In short

Does residential care insurance exist in New Zealand?

We did not find one. The funeral, life and trauma products on the insurer pages we read pay a lump sum on death, terminal illness or a listed condition. None is sold to meet monthly rest home fees. That finding covers what insurers publish, and a licensed adviser may know of something we have not seen.

One link between care and insurance does exist. Chubb Life's funeral cover page says premiums run until a claim, age 90 or the life assured going into long-term care "as per the policy wording", and that an accepted Long-Term Care Premium Waiver application means no future premiums for that cover (Chubb Life). Check the policy document for the terms. That helps with paying premiums, not with the cost of care.

How long-term care is paid for

Care is paid from your own money first. Work and Income's Residential Care Subsidy is for people who have been assessed as needing long-term residential care and whose assets and income are low enough. You start with a needs assessment through a Needs Assessment Service Coordination (NASC) agency, which checks eligibility and decides the level of care. If you are 65 or older you then get a financial means assessment form, and you return it with supporting documents within 90 days of the date you want the subsidy to start (Work and Income).

The asset test: current limits

These are the limits on the Work and Income page updated on 4 August 2026. They change, so read the live page.

Your situation Asset limit
Single, aged 65 or older $300,811 or less in total assets
Couple, both in long-term residential care $300,811 or less, combined
Couple, one partner not in care: leave out the family home and car $164,731 or less
Couple, one partner not in care: include the family home and car $300,811 or less
Aged 50 to 64, single, no dependent children Meets the asset test automatically

The family home and car are left out only in the third row, where you choose the lower limit. In the other rows they count as assets. Some articles quote lower figures such as $284,636 and $155,873. We could not find those on the current Work and Income page, so do not use them.

The income test and gifting

The subsidy also has an income test. Work and Income counts NZ Super, Veteran's Pension and other benefits, 50% of private superannuation, and 50% of life insurance annuities, among other things. It does not count your partner's work earnings or income from assets below annual thresholds of $1,267 for a single person and $2,534 for a couple where both are assessed.

Gifts are looked at too. In the last 5 years, gifts of up to $8,500 a year are not counted, a total of $42,500 for you and your partner, or $85,000 if your partner applies at the same time. Older gifts are treated differently, with up to $27,000 a year combined not counted. Sales are checked for fair value (Work and Income). If you are thinking of giving money away or selling a home before an application, talk to a lawyer or a licensed adviser first.

What if you are over the asset limit?

Then you pay for care yourself until your assets come down to the limit, and you can apply for the subsidy at that point. Work and Income also runs a Residential Care Loan, an interest-free Crown loan paid direct to the rest home and secured by a caveat on your home. It is assessed case by case with no obligation to approve, and it is usually repaid when the home is sold or within 12 months of the person's death, whichever comes first (Work and Income page updated 23 July 2026; Residential Care Loan). Ask Work and Income whether you qualify, since the eligibility tests are separate from the subsidy.

We found no sourced figure for what private rest home fees cost, so this page gives none. Ask the facilities you are considering for their current fees in writing.

The $10,000 prepaid funeral exemption

Work and Income says it does not count "pre-paid funeral expenses for you and your partner of up to $10,000 each, if they're held in a recognised funeral plan" (Work and Income). Two providers say their plans fit this:

Paying into a plan is not free of trade-offs. Consumer NZ says money in a trust may not be withdrawable "unless you're in significant financial hardship" (Consumer NZ). A prepaid funeral account also counts as an asset for the Work and Income Funeral Grant, and prepaid funeral cover can stop you getting that grant (Work and Income). The grant maximum is $2,697.43 (page updated 24 June 2026). The Funeral Directors Association says the $10,000 figure dates from 1994 and is below what a modest attended funeral now costs; its 2026 report puts the average full funeral at $11,700 with cremation and $14,300 with burial (FDANZ).

Do life and funeral insurance policies count as assets?

Work and Income's list of assets includes "life insurance policies with a surrender or cash asset value" (Work and Income). So a policy that could be cashed in may count, up to its surrender value, and the $10,000 exemption is for "a recognised funeral plan"; the page does not name funeral insurance. A pure protection policy is different: Momentum Life's Quick Life wording says the policy "does not build up any cash or surrender value", and its Funeral Insurance wording says the policy "is not a savings or investment plan" (Momentum Life: Quick Life wording; Momentum Life: Funeral wording). We found no source saying how an assessor counts a policy like that, so ask Work and Income in writing, and see what cash value means in NZ life insurance.

If you are weighing funeral insurance against a prepaid plan, our comparison of the two sets out the differences, and what funeral insurance is explains the basics. Total funeral premiums can add up to more than the benefit, and the benefit may not meet the whole cost of a funeral.

Putting the pieces together for a rest home resident

  1. Find out the numbers. Add up assets as Work and Income counts them, using the limit that applies to your household.
  2. Decide who will arrange the funeral and how it will be paid. A prepaid plan, a set-aside account or funeral insurance each treat money differently. See how funerals are paid for.
  3. Keep the estate in order. When a resident dies, the estate may need probate. Our guide to probate in New Zealand covers when it is needed.
  4. Get advice before moving money. Gifts, trusts and plans each interact with the test in ways this page cannot cover.

Where Momentum fits

Momentum Life has no residential care product. Its Funeral Insurance accepts New Zealanders aged 40 to 75 and Quick Life accepts 18 to 65. In its first 24 months Funeral Insurance pays only for accidental death, and Quick Life excludes pre-existing conditions and suicide for the first 2 years. A.M. Best rates Momentum Life B (Fair); see its financial strength page. Many people entering care are older than these entry ages, so the buttons on this page lead to Momentum's online quote and will not suit them. Our rest home funeral cover page and funeral insurance hub cover the older-age options.

Advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). This page is general information, not advice. QuoteHub is a Momentum Life partner, and Smiths Insurance & KiwiSaver may receive a commission on Momentum products; see how we are paid. Last reviewed 20 October 2026.

Frequently asked questions

Is there insurance that pays for a rest home?

We found none on sale in New Zealand. The state help is the Residential Care Subsidy, and it has asset and income tests.

What is the asset limit for the Residential Care Subsidy?

For a single person aged 65 or older it is $300,811, per Work and Income's page updated 4 August 2026. A couple with one partner not in care can choose $164,731 without the home and car or $300,811 with them.

Is a prepaid funeral plan counted?

Prepaid funeral expenses of up to $10,000 each, held in a recognised funeral plan, are not counted. Anything above $10,000 can be. Life insurance policies with a surrender or cash value are counted as assets.

Can I give my money away to qualify?

Work and Income looks at gifts. Some are not counted up to set yearly amounts, but larger gifts are. Get advice before gifting.

References

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