Let’s be real – life insurance isn’t the most thrilling item on your to-do list. For many Kiwis, it sits somewhere between "I know I should sort this" and "it’s too confusing to tackle." But getting it wrong—or worse, ignoring it altogether—can have serious consequences for your family’s future. Take Sarah and James Thompson, a fictional Auckland couple who just welcomed their first child, Maia. Like many new parents, they knew they needed life insurance but weren’t sure where to start. "We thought a basic policy through the bank was enough," Sarah recalls. "It wasn’t until we did the maths that we realised we’d fallen short." This story might be fictional, but it reflects the challenges faced by many Kiwi families. It’s a reminder of why getting life insurance right is so important. Let’s dive into the most common mistakes Kiwis make—and how you can avoid them.
1. The "she’ll be right" approach to coverage
Here’s a sobering fact: 59% of Kiwis are underinsured for life insurance according to research from the Financial Services Council. In our example, the Thompsons initially took out a $250,000 policy, thinking it would be enough. But after crunching the numbers – mortgage, childcare costs, future education expenses – they realised they needed nearly triple that amount for proper protection.
Tip: As a starting calculate your needs by adding up:
Your mortgage balance
Expected childcare costs
Future education expenses
At least 3-5 years of income replacement
Outstanding debts
Are you wondering if life insurance is right for you? Read our blog to learn about the basics of life insurance and why it’s important.
2. Forgetting about income protection
While life insurance covers the worst-case scenario, 89% of Kiwis are underinsured for income protection. In our fictional example, when James had a mountain biking accident that kept him off work for three months, the Thompsons learned this lesson the hard way. Fortunately, they'd added income protection to their insurance portfolio just months before.
Tip: Income protection is crucial to ensure your family’s lifestyle stays intact if you can’t work. If you’re interested in learning more about income protection, visit our article on Protecting Your Income.
3. The "set and forget" trap
Life changes, and your insurance should too. Major events that require a policy review:
Having children
Buying a bigger home
Career changes
Starting a business
Marriage or divorce
Not sure how life events affect your coverage? Read our article on life insurance for different life stages in NZ.
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4. Skimming over the fine print
In our example, Sarah was surprised to learn their initial policy had exclusions for certain recreational activities – including James's beloved mountain biking. "We assumed everything would be covered," she says. "Reading the policy details properly saved us from a potentially devastating situation."
5. Choosing price over protection
While it’s tempting to go for the cheapest option, our fictional family learned that comparing policies involves more than just premiums. Different insurers offer varying:
Coverage limits
Exclusions
Additional benefits
Claims processes
Health and lifestyle rewards
Tip: Don’t just look at the price. Use Quashed’s real-time comparison tool to see all the important details side by side.
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How Quashed makes it simple
At Quashed, we make finding the right life insurance simple — no matter your life stage. With coverage options up to $2 million, you can compare policies side by side, clearly understand the benefits, and make confident decisions—all in one place.
With Quashed, you can choose from leading insurers and enjoy exclusive perks such as:
10% off your first year with Pinnacle Life.
First month free and access to AIA Vitality, a health and wellbeing programme offering fitness discounts, cash back rewards, and more.
Personalised expert advice and support with Partners Life.
Ready to get started? Compare life insurance today from trusted NZ providers and find affordable, tailored coverage that fits your needs — in minutes.
FAQs
How can I avoid life insurance pitfalls in New Zealand?
The key to avoiding pitfalls is doing your homework — know how much coverage you need, review policies regularly, and understand the fine print. For practical insights, check out our blog on how to choose the right life insurance policy in NZ.
Why is underinsurance a common issue for Kiwis?
Underinsuring often happens because people underestimate future costs like mortgages, childcare, and education. It’s vital to calculate these expenses upfront. Learn more about the cost of life insurance in NZ and how to plan effectively.
How often should I review my life insurance policy?
Life changes—like having kids, buying a home, or changing jobs—can impact your coverage needs. Reviewing your policy annually ensures you stay protected. Learn more about life insurance through different life stages.
What is life insurance, and do I really need it?
Life insurance provides financial protection for your loved ones if something happens to you. If you're wondering how it works or whether it's right for you, check out our guide on what life insurance is and why it’s important.
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