When was the last time you had your life insurance policy reviewed?

Insurance Companies and advisers often tell New Zealanders that they are under insured. They do it so much, in fact, it’s almost become part of the sales pitch

But if that sounds a little cynical, it’s useful to remind ourselves that, internationally, New Zealand languishes at the bottom of the OECD ladder when it comes to life insurance penetration.

When you consider that the core reason for taking out insurance is to protect borrowings or children, the level of underinsurance is even more concerning.

For example, in the past five years there has been an increase of nearly 50% in household debt, which has risen to $156 billion or approximately $100,000 per household1. In addition, during this period, consumer credit (personal loans, credit cards) has increased by $5 billion.

Since 2004, there has been a mini baby boom with a significant increase in the average number of births. Last year there were approximately 68,000 births in New Zealand, an increase of nearly 20% since 2001 (and the highest number of live births for 20 years).

So, whether it’s  to repay debt or protect loved ones, the case for New Zealanders to have a higher level of insurance coverage is compelling  - so why don’t we?

One Major Insurance Company’s research has provided interesting insights into the mindset of New Zealanders and their reasons for not insuring. Some think “I am OK, it won’t happen to me”. Others think “I can always sell my house” or “I have the savings” or “I’ll get a loan”.

But once again, the situation has changed remarkably over the past five years. In 2008. the financial worth of New Zealanders (exclude housing) declined by a massive 97.4%. for those with housing, their net worth declined by ‘only’ 10.1%. We can expect this to deteriorate further in the current recession.

A significant reduction in levels of saving – in the past three years there has been a $6 billion decline – means that for many New Zealanders, the traditional ‘emergency fund’ can no longer be relied upon. And for those thinking that borrowing is the answer, the ability to borrow has been significantly reduced as credit has become harder to obtain.

So are New Zealanders underinsured? The fact is New Zealanders are not just underinsured but massively underinsured.

This highlights how important it is to have your current situation assessed and have your insurance policies reviewed to make sure all of your current and future needs have been adequately covered.

Evaluate your current situation to make sure you consider consumer credit such as personal loans, hire purchase or credit cards debt risk is covered by your insurance should the unexpected happen. This sort of review demonstrates how important it is to keep policies up to date as even an unprotected $20, 0000 car loan carries a significant risk.

During this recession times many of you may have had your net asset position deteriorate through increased lending and decrease in housing value and savings. Your lifestyle may also have changed, with some having children, and others getting married. All of these changes give rise to a valid reason to reviews levels of insurance cover.

The last decade has seen a fundamental change in the way the New Zealand economy operates, with significant increases in debt, reductions in savings and increase in the birth rate. What has not changed though, is the need for protection, and the need for life insurance.

1. New Zealand Statistics 2007 Household Economy Survey (HES)).


The above information has been provided to serve only as a guideline to assist in evaluating your insurance needs. You are encouraged to do your own research before arriving at any decisions.

For further information, please contact:
Oliver Pereira – OPM Insurance Services Ltd.
Ph. 0800 66 77 92  Faxmail. 021 551 669 Mobile. 021 66 77 92
Email. oliver.pereira@xtra.co.nz