Funeral insurance on a benefit and the Work and Income grant

Written by Henry Smith · Reviewed by Smiths Insurance & KiwiSaver, licensed Financial Advice Provider (FSP712931) · Updated 2026-10-20 · Reviewed quarterly, when the underlying data is restated.

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.

Nothing in Momentum Life's Funeral Insurance wording makes receiving a benefit a bar to applying, so you can take out funeral insurance while on a benefit if you meet its age and residency rules. The catch is the Work and Income Funeral Grant, which is paid only when other help is not available. A payout can count against it. The grant is $2,697.43 at most (Work and Income: Funeral Grant).

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Funeral cover: Only accidental death is covered for the first 2 years. Total premiums can add up to more than the cover, and it may not meet the whole cost of a funeral.

Life cover: Conditions you already have aren't covered for the first 2 years (premiums refunded instead). Suicide isn't covered for the first 2 years, and a few conditions can be excluded permanently.

Insurer: Momentum Life Limited. Financial strength rating B (Fair) from AM Best, affirmed 11 February 2026; B ratings sit in AM Best's 'vulnerable' range. The rating scale is available for inspection at every Momentum Life office in New Zealand. What this means

Already have cover? Keep it. New cover won't pay for a condition you already have in its first 2 years.

Opens Momentum Life's online application; its guidance only covers eligibility. QuoteHub is a Momentum Life partner. Smiths Insurance & KiwiSaver may receive a commission if you buy. General information, not advice.

What this page covers

This page looks at one question: how funeral insurance sits beside the Work and Income Funeral Grant for someone on a low income or a benefit. It is not a comparison of insurers. For that, see our funeral insurance hub, and for the head-to-head of insurance against the grant, see funeral insurance versus the Work and Income grant. The grant itself is explained in our funeral grant guide.

Can you buy funeral insurance while on a benefit?

Momentum's Funeral Insurance accepts New Zealanders aged 40 to 75, with no medicals, health questions or paperwork. "New Zealander" means living in New Zealand at application and being an NZ or Australian citizen, a permanent resident visa holder, or someone in New Zealand continuously for at least 12 months on a valid temporary work visa (Momentum Life: Funeral Insurance Policy Wording, 17 August 2023). We found no condition about income or benefit status in the wording. Other insurers set their own rules, so check each one.

What matters more on a tight budget is the cost of staying covered:

Premiums are paid fortnightly, monthly or annually, and card payments carry a processing fee. If premiums are unpaid for over a month, Momentum can cancel the policy, and getting it back is by application and not guaranteed.
The benefit ($3,000 to $30,000) is a fixed amount towards costs. The wording says total premiums could exceed the benefit and the benefit may not cover the whole funeral.
For the first 24 months only accidental death (within 90 days of the accident) is paid. Any other death in that time pays nothing, and all premiums for that person are refunded.
Cancelling at any time on 30 days' notice means losing the premiums you have paid.

How a payout can affect the Funeral Grant

The Funeral Grant is a payment of up to $2,697.43 towards a funeral, and it is not repaid if the criteria are met. Work and Income's page says: "If there's other help with costs available to you, you may not be able to get a Funeral Grant", and gives "prepaid funeral cover" as an example. It does not name funeral insurance (page updated 24 June 2026).

Its operational manual is more specific about assets. For a Funeral Grant it counts the assets of the person who died, the surviving partner, or the parent of a deceased child. Listed cash assets include "proceeds from life insurance policies or retirement funds" and a "prepaid funeral account" counted at the full amount before it is spent (Work and Income: Funeral Grant assets). A funeral insurance payout is not named there either. It is a cash sum paid on death, so assume it can count, and ask Work and Income to confirm.

We could not find guidance on where a payout paid to a named beneficiary, rather than to the person who died or their estate, sits in the assessment. Work and Income decides each case.

How the tests work

Situation	Income test	Assets
The person who died was your partner or child	Yes, your annual income before tax must be under a limit (for example $38,522.12 for a partner aged 18 or over with no children)	The first $2,351.46 of your assets is ignored; the family home, family car and personal possessions are non-assessable
A single adult over 18 whose funeral you arrange	None	Their assets are deducted from the funeral expenses
The person who died was your parent or guardian	None	Their assets are deducted from the funeral expenses; your own assets are not counted

The grant is the lesser of the maximum or the unmet balance of the funeral costs. The grant also cannot be paid if an ACC funeral grant, a Veterans' lump sum or a War Funeral Grant is payable. Check the table against the current Work and Income page, because limits are reviewed, and use our grant checker for a first look.

A worked example with round numbers

This example is illustrative, not Work and Income's calculation. FDANZ's 2026 report puts a cremation funeral with 50 guests at an average of $11,700 (FDANZ, 2026 Industry Trends Report). Suppose a single adult has no other assets.

No insurance. If the grant is paid in full, $2,697.43 goes towards $11,700 and about $9,000 is left for the family to find.
A $10,000 payout that counts as an asset. The unmet balance falls to about $1,700, so the grant could be at most that.

In the second case the family has all the money but the grant has mostly been replaced, not added to. If the death was within the first 24 months and not accidental, the policy pays nothing and the grant position is as in the first case.

Prepaid funerals and the $10,000 figure

You may see that prepaid funerals are "exempt up to $10,000". That is the Residential Care Subsidy asset test for older people, not the Funeral Grant. The Residential Care Subsidy page says pre-paid funeral expenses of up to $10,000 each, held in a recognised funeral plan, are not counted as an asset there (Work and Income: Residential Care Subsidy, updated 4 August 2026). For the Funeral Grant, the manual counts the full prepaid account. The page does not mention funeral insurance. See funeral insurance versus a prepaid funeral.

Options if money is tight

Use the grant and plan the funeral to fit. Work and Income lists reasonable expenses, and FDANZ puts an unattended cremation, with no service, at about $4,700 on average against $11,700 for a full cremation funeral. See funeral costs in New Zealand.
Save. A set-aside fund counts as an asset too, but you control it. See funeral insurance versus saving.
Insurance. It suits people who want a defined sum paid, can keep up the premiums and are aged 40 to 75, knowing the grant may fall away.

Where to get advice

Work and Income can tell you how your own situation would be assessed. For insurance, the buttons on this page open Momentum Life's online application, one option among several insurers. Momentum Life Limited holds an A.M. Best rating of B (Fair), which Momentum's own table groups as "Vulnerable" (Momentum Life: Financial Strength). The rating is an opinion, not a recommendation. QuoteHub is a Momentum Life partner and Smiths Insurance & KiwiSaver may receive a commission if you buy a Momentum policy; see how we are paid. Advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). More on the Momentum Funeral Cover page.