Funeral insurance and NZ tax deductibility

Written by · 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.

For most people in New Zealand, funeral insurance premiums are not a tax deduction. Inland Revenue (IRD) lists income protection insurance among the insurance costs an individual may claim, and does not list life or funeral insurance. IRD's general rule is that insurance payouts are excluded income. Employer-paid, business and trust arrangements can be treated differently, so ask a tax professional before you claim anything.

This is general information, not tax advice. QuoteHub and Smiths Insurance & KiwiSaver are not tax advisers. Where we could not find an IRD source for something, we say so.

Is funeral insurance tax deductible in New Zealand?

For a person paying their own premiums, the general position is that they are not claimed. IRD's list of non-business expenses for individuals names one insurance cost, "the cost of income protection insurance if the insurance payout would be taxable", and tells people to ask their insurer whether it is deductible. It does not mention life or funeral insurance (IRD: Non-business expenses, retrieved 20 October 2026). We found no IRD page that allows an individual to deduct funeral insurance premiums, and we did not find one that rules it out in so many words either. Treat the premiums as not claimable unless a tax adviser tells you otherwise for your situation.

Are funeral insurance payouts taxable?

IRD says: "Generally, insurance payouts are excluded income." That page deals mostly with income protection and personal sickness insurance, and it does not mention death benefits (IRD: Insurance payouts, last updated 28 April 2021). A separate IRD item, QB 18/04, says that payments replacing income are likely to be income, while "other lump sum and reimbursing claim payments are unlikely to be income". A funeral benefit is a lump sum paid on death, so the general rule points to it not being taxable. Say "generally not taxable", not "tax-free", and check your own case.

Who receives the payout?

Under Momentum Life's Funeral Insurance wording, the benefit is paid to the policy owner, or if the owner has died to the nominated beneficiaries, or failing that to the owner or the owner's executor. A beneficiary must be a natural person, so Momentum cannot pay a company, charity or other organisation directly. See who receives the payout for how nominations work.

Can a business or employer deduct funeral insurance premiums?

It depends on the arrangement, and we did not find IRD guidance written for funeral insurance. IRD's QB 18/03 deals with employer-owned term life policies: death claims are not taxable income of the employee or the estate, and premiums are deductible to the employer and not PAYE, but are subject to fringe benefit tax. QB 18/02 deals with policies owned by the employee where the employer pays the premiums, and says PAYE applies to the premiums while lump-sum claims are not taxable. Those papers are about term life cover. Do not assume the same treatment applies to a funeral policy. An employer or business owner should ask their accountant.

What about a trust or an estate?

We found no source on the tax treatment of a policy held in a trust. Momentum's Funeral Insurance owner must be a natural person, so a trust cannot own or be named beneficiary of its policy. If the benefit is paid to the executor, it becomes part of the estate. IRD says that "generally, you do not pay tax when you inherit property", although tax may apply if you later sell it (IRD: Inheriting property, last updated 18 October 2023), and estate duty ended for deaths on or after 17 December 1992 (Estate Duty Abolition Act 1993, section 3). Estates and trusts have their own tax rules on income they earn, so ask a tax professional if the estate holds more than the funeral money.

Are funeral grants taxable?

No. Work and Income describes the Funeral Grant as non-taxable and says it is not repaid if the criteria are met, with a maximum of $2,697.43 (Work and Income: Funeral Grant). ACC describes its funeral grant, up to $8,236.40 for deaths from covered injury, as tax-free (ACC: Financial support after death). Read the funeral grant guide for the tests.

Does a payout affect other money or support?

It can, and it is a better question than tax for many families. The Funeral Grant is tested against income and assets, and prepaid funeral cover can stop you getting it. Work and Income counts life insurance proceeds among the cash assets it assesses. If you may apply for a grant, tell Work and Income about any insurance first. A prepaid funeral plan has a related rule: up to $10,000 each in a recognised plan is excluded from the residential care subsidy asset test, and Consumer NZ notes tax may apply to interest earned in a prepaid trust (Consumer NZ: 5 ways to pay for your funeral).

Do I put funeral insurance on my tax return?

We found no IRD guidance that says a personal funeral insurance policy must be declared. If a payout is excluded income, it is not added to taxable income. Because we could not find a page that addresses funeral insurance by name, ask IRD or a tax agent if you are unsure.

When should I get specialist tax advice?

Ask before you claim a deduction, if an employer or company pays the premiums, if a trust is involved, if the estate has income of its own, or if you live or hold assets overseas. A tax agent or accountant can answer for your facts, and IRD's website explains the general rules.

Where to find more on funeral costs and funding

Funeral insurance pays a fixed benefit of $3,000 to $30,000 towards costs. It is not a replacement for savings, and total premiums can exceed the benefit. For costs, see what funeral insurance costs, paying for a funeral and whether funeral insurance is worth it. The first 24 months of Momentum's cover pay only for accidental death, and premiums are refunded if the person dies of another cause in that time. The basics are in what funeral insurance is, and Momentum's own plan is on the Funeral Cover page.

The buttons on this page open Momentum Life's online application. QuoteHub is a Momentum Life partner, and Smiths Insurance & KiwiSaver may receive a commission if you buy a Momentum policy. 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.

Adviser's view

For an individual, funeral insurance premiums are generally not something you claim on a tax return, and IRD's general rule is that insurance payouts are excluded income. Business, employer and trust arrangements are different, and we found no IRD guidance written for funeral insurance itself. Ask IRD or a tax adviser before you claim anything.
, Financial Adviser (FSP1010699). General information, not personalised financial advice.

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Cite this page QuoteHub NZ (2026). Is Funeral Insurance Tax Deductible in NZ?. www.quotehub.co.nz/funeral-insurance/is-funeral-insurance-tax-deductible-nz. Updated 2026-10-20.

References

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