Term life vs whole of life cover in New Zealand
Term life covers you for a period and pays only if you die within it. Whole of life is meant to pay whenever death occurs and often has a savings element. In New Zealand today the practical question for most people is not term versus whole of life — it is stepped versus level premiums.
Updated 2026-09-16 · last checked against its sources on that date
Written by Life Insurance NZ. No personal byline: the organisation is the author.What is the difference between term life and whole of life cover?
Term life cover runs for a defined period or to a stated age, and if it ends without a claim it pays nothing and there is nothing to cash in. Whole of life cover is designed to pay whenever death occurs rather than within a window, and traditionally carried a savings component.
- Term life cover runs for a defined period or to a stated age. If the policy ends without a claim, it pays nothing and there is nothing to cash in. It is insurance in the plainest sense: you are buying protection for a period, not building an asset.
- Whole of life cover is designed to pay out whenever death occurs rather than within a window, and traditionally carried an investment or savings component with a surrender value. Policies of this kind were sold widely in New Zealand in the past, and many people still hold one.
If you hold an older policy and are not sure which kind it is, the insurer will tell you, and the policy document says so. That is worth knowing before you cancel anything, because a policy issued decades ago was underwritten at the age and health you were then.
What kinds of life cover are actually on sale in New Zealand now?
Looking at what the licensed insurers themselves publish, the personal products listed are life cover, trauma or critical illness cover, income protection, total and permanent disability cover, and cover aimed at a mortgage. None of the insurer sites we read on 2026-09-16 leads with a whole of life product.
What the market is organised around instead is how the premium behaves over time. The stepped vs level premiums guide goes through it in detail.
What is the difference between stepped and level premiums?
The two differ in how the price behaves over time, not in what you are covered for. Stepped premiums are recalculated as you get older, so they typically start lower and rise each year. Level premiums are held the same, or nearly the same, for a set period, so they typically start higher.
- Stepped premiums are recalculated as you get older, so they typically start lower and rise each year.
- Level premiums are held the same, or nearly the same, for a set period, so they typically start higher and do not climb in the same way.
Which of the two is cheaper depends entirely on how long you keep the policy, and that is not knowable in advance. We publish no crossover point and no worked comparison, because doing it honestly needs real premium rates over a real term — and we could not source New Zealand premium figures we were willing to publish. See what we dropped and why on the editorial policy page.
What should you ask about a life policy?
Five things, and the answers to all of them are in the policy document: when the cover ends, whether the premiums are stepped or level, whether the sum insured stays flat or indexes, whether trauma or TPD cover is attached to the life sum insured, and whether what you disclosed is still accurate.
- When does the cover end — a date, an age, or when premiums stop?
- Are the premiums stepped or level, and if level, for how long?
- Does the sum insured stay flat, reduce, or index with inflation, and does the premium follow?
- Is any trauma or TPD cover attached to the life sum insured, so that a claim on one reduces the other?
- What did you disclose when it was taken out, and is it still accurate?
Questions
Should I cash in an old whole of life policy?
That is advice about your own situation and we cannot give it. What we would say generally is that an old policy was underwritten at the age and health you were then, which cannot be recreated, and that surrender values and tax treatment vary. Take it to a licensed adviser before doing anything irreversible.
Is term life cover a waste of money if nothing happens?
By that logic so is house insurance. Term cover buys protection for a period; if the period passes without a claim, the protection is what you got. Whether it is worth its price for you is a question about your circumstances.
Which is cheaper, stepped or level?
It depends how long you hold the policy, and there is no general answer. Stepped typically starts lower and rises; level typically starts higher and does not climb in the same way. We publish no crossover figure because we could not source New Zealand premium rates to calculate one honestly.
Sources
Read on 2026-09-16. If a source and this page disagree, the source is right.
Related
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