Is funeral insurance a scam in New Zealand?
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.
Funeral insurance sold by a licensed New Zealand insurer is not a scam: the insurer is regulated, the terms are published and disputes can go to a free ombudsman. It is, though, often criticised as poor value. Consumer NZ has called it "poor value for money", and the Insurance & Financial Services Ombudsman Scheme (IFSO) has said insurers should warn buyers that they may pay more in premiums than the policy pays out. Those criticisms are fair, and this page sets them out.
Why people ask this question
People search "is funeral insurance a scam" for three reasons. They have seen a policy where the premiums ran past the payout. They have been told a death from illness in the first months pays nothing. Or they have had a call or an advert that felt pushy. The first two are product features worth understanding. The third deserves caution about who is selling, which we cover below.
What the critics have said
- Consumer NZ, 23 July 2020. It reported an 85-year-old woman who held two $5,000 Fidelity Life policies, one for herself and one for her son, $10,000 in total, and paid $18,900 in premiums over 17 years, which RNZ put at about $9,000 more than the insurer would pay. Its head of research said funeral insurance "can be the priciest way to pay for your funeral" and that the lifetime cost "is seldom disclosed up front" (RNZ, 23 July 2020).
- Consumer NZ, updated 22 May 2024. Its research found funeral insurance to be "poor value for money". Using quotes for $10,000 of cover for a 64-year-old, it calculated that premiums could total 10% to 100% more than the policy's value by age 84, and it noted there is generally no refund if you cancel or miss payments. It suggests a savings account as an alternative (Consumer NZ: 5 ways to pay for your funeral).
- IFSO, December 2025. IFSO said insurers should warn you that you may pay more than you get back "in the policy, on the website and in any advertising", and that without such a warning it "is likely to uphold the complaint" (IFSO: Funeral insurance, what consumers need to know).
These are views about the product category and one old policy. They are not findings against any insurer named on this page.
Common complaints, and what Momentum Life's wording says
Momentum Life Limited is a licensed life insurer, and its Funeral Insurance accepts New Zealanders aged 40 to 75 with no health questions, for a fixed benefit of $3,000 to $30,000. Here is how the usual complaints map to its wording (issue date 17 August 2023).
| The complaint | What the wording says | What to do |
|---|---|---|
| "I could pay more than it pays out" | The wording itself says total premiums could exceed the benefit and the benefit may not cover the cost of a funeral. Premiums are level until the 89th birthday, then stop. | Multiply the quoted premium by the years to 89 before you buy. Our break-even calculator does this. |
| "Nothing is paid in the early years" | For the first 24 months the benefit is paid only for accidental death within 90 days of the accident. For any other death in that time, no benefit is paid and all premiums for that person are refunded. | Do not buy it if you may need the money soon. |
| "I lose everything if I stop" | You can cancel with 30 days' notice and lose the premiums paid. A 30-day free look from the acceptance date gives a full refund if no claim has been made. | Decide within the free look, and only buy what you can keep paying for. |
| "The price can go up" | Premiums can change for everyone on the same offer if tax law changes or claims experience is significantly different from expected, with 30 days' written notice. | Ask what you can afford if the rate rises. |
| "It doesn't pay for the funeral" | The benefit is a fixed sum, not a funeral. | Compare it with FDANZ's average of $11,700 for a cremation with a service and $14,300 for a burial (FDANZ 2026 report). |
| "I am worried about the insurer's rating" | Momentum's A.M. Best rating is B (Fair), affirmed 11 February 2026, which Momentum's own table places in the "Vulnerable" range. The rating is not a recommendation. | Read the financial strength page and decide if it matters for a sum this size. |
It is sometimes said that a policy with no medical checks only ever pays for accidents. That is not accurate as a rule: the limit lasts for a set period and then ordinary cover applies. The period differs by policy: Momentum Life, AA Life and Chubb Life use 24 months and refund premiums for another cause of death; NZ Seniors and OneChoice use 12 months, and OneChoice says you cannot get a refund of premiums after the cooling-off period. Check the length and the refund rule on any policy you consider.
A simple arithmetic check
This uses made-up numbers, not a Momentum price. Say a policy cost $480 a year and you kept it for 25 years: you would have paid $12,000, which is more than a $10,000 benefit. If you die after 10 years you will have paid $4,800 for a $10,000 benefit. The answer depends on how long you live and what the premium is. That is why the break-even tables on our page on whether funeral insurance is worth it matter more than any general claim that it is good or bad.
Is any structure fairer to the buyer?
Premium structures differ. Most funeral policies run for a long period and can cost more than they pay. One product in our comparison, Greenwich Life's Funeral Plan, says premiums stop as soon as the total paid equals the benefit, so you cannot pay more than you get; it is for ages 30 to 70 with benefits of $5,000 to $20,000, and Greenwich's own page is the source (Greenwich Life: The Funeral Plan). Momentum's premiums stop at 89 instead. Neither structure is better in every case.
Fair alternatives
- Savings. A separate savings account has no waiting period and no cap. Consumer NZ suggests setting one up; see funeral insurance versus saving.
- A prepaid funeral plan. Now For Them, run by FDANZ's charitable company, says it is "not a savings or investment product" and pays no interest, and the first $10,000 is excluded from residential care asset testing under current Ministry of Social Development policy (FDANZ: What is Now For Them). Consumer NZ warns money in a trust may not be withdrawable unless you are in significant financial hardship.
- Government help. Work and Income's Funeral Grant is up to $2,697.43 and is tested against income and assets (Work and Income).
- Life cover with a funeral advance. Some life policies release part of the cover early on notification of death.
Whether it suits you is a separate question
Whether a policy suits a particular person is a different question from whether it is a scam, and our page on whether funeral insurance is worth it works through it with break-even tables. Neither buying nor not buying is wrong. Our funeral insurance myths page covers other popular claims.
Scams are different from poor value
Real scams exist around insurance and death. If someone phones or messages you unprompted, ask for their company's name and FSP number, do not give card or bank details on the call, and ring back using a number from the insurer's website. See our page on senior life insurance scams. Momentum Life's licence and FSP number (FSP472286) are on its financial strength page. If you have a complaint about a Momentum policy, contact Momentum first on 0800 108 108; if it is not resolved, IFSO (0800 888 202) is free, and its assessment is binding on Momentum. Our page on funeral insurance disputes explains the steps.
Where to get advice
General information, not personal advice. The buttons on this page open Momentum Life's online application, one option among many. 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). Back to the funeral insurance hub or Momentum Life Funeral Cover.
Adviser's view
Funeral insurance from a licensed insurer is not a scam: the policy exists, the terms are written down and disputes can go to a free ombudsman. Consumer NZ has found it poor value for money, and the main criticisms are fair. Total premiums can pass the benefit, the first 12 to 24 months pay only for accidents, and cancelling loses what you paid. Read those three terms before you buy anything.
Talk to a licensed adviser about funeral cover · free, no obligation.
Cite this page QuoteHub NZ (2026). Is Funeral Insurance a Scam in NZ? An Honest Answer. www.quotehub.co.nz/funeral-insurance/is-funeral-insurance-a-scam-nz. Updated 2026-10-20.
References
- Momentum Life: Funeral Insurance Policy Wording (PDF, issue date 17 August 2023)
- Momentum Life: Financial Strength
- RNZ: Consumer NZ slams funeral insurance firms over prices (23 July 2020)
- Consumer NZ: 5 ways to pay for your funeral
- IFSO: Funeral insurance, what consumers need to know
- FDANZ: 2026 New Zealand Funeral Industry Trends Report (PDF)
- FDANZ: What is Now For Them
- Greenwich Life: The Funeral Plan
- Work and Income: Funeral Grant
Explore related pages: Life Insurance, Income Protection, Health Insurance, Trauma Insurance, For Brokers.