Funeral cover before moving into a rest home in NZ

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.

The Work and Income residential care subsidy asset test excludes prepaid funeral expenses of up to $10,000 each, if they are held in a recognised funeral plan. Its list of assets includes life insurance policies with a surrender or cash asset value. It does not name funeral insurance. Check your own position with the subsidy unit before you decide.

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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.

The test applies when a person needs residential care and applies for the subsidy. A needs assessment comes first; the asset check is part of the financial means assessment that follows. For a single person aged 65 or older, the page says total assets must be $300,811 or less, and the family home and personal vehicle count in some situations, including when you have no partner (Work and Income: Residential Care Subsidy, updated 4 August 2026). The $10,000 prepaid funeral exclusion is for pre-paid funeral expenses "for you and your partner of up to $10,000 each, if they're held in a recognised funeral plan". The page describes no exemption for money in a bank account set aside for a funeral, only for funeral expenses held in a recognised plan, up to the limit. That is why prepaid plans are often compared with insurance for people near care.

What the page does and does not say

Item	What Work and Income's page says
Prepaid funeral expenses	Excluded up to $10,000 each, if held in a recognised funeral plan
Life insurance	"Life insurance policies with a surrender or cash asset value" are listed as an asset
Funeral insurance	Not named on the page
Asset limit, single person 65 or over	Total assets $300,811 or less (page updated 4 August 2026)

Momentum Life's Funeral Insurance wording says the policy "is not a savings or investment plan". If you cancel, you lose the benefit of the premiums already paid, apart from a full refund within 30 days of the acceptance date if no claim has been made (Momentum Life: Funeral Insurance Policy Wording). We found no surrender or cash value in it. On that reading it does not look like the asset the page describes, but that is our reading, not Work and Income's. Another insurer's policy may differ. Call the subsidy unit and ask in writing about your own policy. We cannot give legal or financial advice on the asset test.

The $10,000 exemption in plain terms

FDANZ says the $10,000 figure dates from 1994 and that $10,000 is now well below the cost of a modest attended funeral. Its report puts a full cremation funeral for 50 guests at an average of $11,700 and a burial at $14,300 (FDANZ, 2026 New Zealand Funeral Industry Trends Report). Two prepaid options are described:

Now For Them (run by The Funeral Trust Services Limited, FDANZ) says the first $10,000 is excluded from residential care asset testing under current Ministry of Social Development policy, that it is "not a savings or investment product" and that no interest or return is paid (FDANZ: What is Now For Them).
Public Trust Prepaid Funeral Trust says the first $10,000 is exempt from the subsidy asset test, with a set-up fee and an end fee and no ongoing fees (Public Trust: Prepaid Funeral Trust). We do not know the fee amounts.

Consumer NZ warns that money in a trust may not be withdrawable "unless you're in significant financial hardship" (Consumer NZ: 5 ways to pay for your funeral). Read more in prepaid funerals and funeral insurance versus prepaid.

Can you keep paying in a rest home?

A trust is paid once or in instalments. Insurance is paid for years. The points to check for Momentum's Funeral Insurance:

Premiums are fixed each year until the 89th birthday, then stop. They can be changed for everyone on the offer for a change in tax or other law, or for claims experience significantly different from expected, on 30 days' notice.
If premiums stop for more than a month, Momentum can cancel the policy. Reinstatement is by application and subject to its terms and conditions. Cancelling loses the premiums paid.
Total premiums could exceed the benefit, and the benefit may not cover a whole funeral.
Who pays. The policy owner pays. An adult child can own a policy on a parent, because the wording counts a parent as a relative. The wording we read does not describe transferring ownership of an existing policy, so ask Momentum.
Another insurer's approach. Chubb's funeral page says its premiums stop on entering long-term care, among other triggers. Check the terms (Chubb: Funeral cover).

Age limits and the first 24 months

Momentum's Funeral Insurance takes New Zealanders aged 40 to 75 and nobody over 75, so for someone aged 76 or more it is not an option. See funeral insurance over 75 for what other insurers publish. For a person aged 75 or under, remember the first 24 months: only an accidental death pays, and any other death in that window returns the premiums and pays no benefit. Cover bought shortly before entering care may not pay if the person dies of illness soon afterwards.

A checklist before the move

Ask the subsidy unit in writing how your funeral insurance, if you have it, is treated.
Check how much is in any prepaid plan, and whether it is a recognised plan, up to $10,000 each.
Add up what the policy costs to keep, and whether you can keep paying on your income.
Check who owns the policy and who would claim.
Consider what the family would do if the policy lapsed.
Check the Funeral Grant: it is up to $2,697.43, and a prepaid funeral account counts as an asset for it, and prepaid funeral cover can stop you getting it (Work and Income: Funeral Grant).

For a parent, see funeral insurance for parents.

Where to get advice

The buttons on this page open Momentum Life's online application. They are open only to someone aged 75 or under. Momentum's A.M. Best rating is B (Fair), which Momentum's own table places in its "Vulnerable" range; see its financial strength page. 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. A licensed adviser can talk through the options; they cannot rule on the asset test. 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 read about Momentum Funeral Cover.