Does New Zealand Insurance Pay Anything Back If You Never Claim?

One of the questions I am asked most by people new to New Zealand is whether there is a policy that gives your money back if you never claim. Clients who have previously bought savings-style products overseas ask it almost every time.

The answer is: essentially, no.

Mainstream life, trauma and health cover in New Zealand is pure protection. You pay a premium, you get cover, and if nothing happens then what you bought was a year of being protected. Nothing is returned and there is no cash value. The AIA wording puts it plainly: “This policy does not participate in the profits of AIA. The policy has no surrender value or cash value if it is cancelled.”

The endowment and return-of-premium products that are common in some other markets are not sold here.

Why New Zealand does not do return-of-premium

What is a return-of-premium policy, underneath? It is protection plus forced saving. The insurer charges you a good deal more than the risk is worth, invests the difference, and hands your capital back at the end of the term.

It sounds appealing, but the returns are usually poor, and the protection component is not priced cheaply either. In plain terms, you are refunding yourself with your own money.

New Zealand separates the two jobs. Insurance just does insurance, priced on pure risk — which is why the same sum insured costs far less here, and why you can stop at any time. Saving and investing happen somewhere else, through KiwiSaver or your own investments.

There is a cost to that, of course: if nothing happens, the money is spent. But that is the same logic as car or house insurance. You bought this year’s risk, not a savings account.

Four places where money does come back

There is no return-of-premium product, but there are several points in the wording that put money back in your pocket, and most people have never been told about them.

1. A 30-day free look period, fully refunded

Change your mind after buying and cancel within 30 days, and your premiums are refunded in full.

Chubb’s wording: “We’ll refund your premiums if you cancel within 30 days of your policy starting” — not available if you have already claimed. Partners Life offers a “30-day Free Look Period from your Policy Commencement Date… We’ll refund all premiums paid”. AIA’s free look runs 15 days from when you receive the policy documents, with the wording treating the fifth day after posting as the date of receipt.

Which is why I tell every client the same thing: when the policy documents arrive, read them during the free look period.

2. A loyalty discount that grows each year

Some insurers start applying a loyalty discount after two years: 1% at first, growing by a percentage point a year, up to 10%.

Put that on a level-premium life or trauma policy — the premium does not rise and the discount keeps growing — and what you pay each year goes down.

Two other discounts worth knowing about. AIA Vitality members get 10% off first-year premiums, after which it moves up or down each year with your activity level, up to a maximum of 20%, as set out in the AIA Vitality handbook. AIA also offers a Multi-Benefit Discount of up to 15% when you hold several covers with them.

3. Premium holidays: when money is tight, the policy survives

This is the one I find most useful and the one almost nobody knows about.

Partners Life has a Premium Holiday: if you are made redundant, go bankrupt, or leave work to care for a sick partner or child, you can apply to pause premiums while the policy stays in force. Each holiday runs up to 6 months, and 6 months is also the total available over the life of the policy. Anything that happens during the pause cannot be claimed.

nib has Loyalty – Suspending your Cover: after a year in force, you can suspend the policy for unemployment or redundancy, going overseas, or parental leave. No premiums and no claims while suspended, and no new underwriting when you restart.

Compare the two paths. Cancel the policy because money is tight, then try to buy it back a few years later and discover you now have a health history and cannot get cover. Pausing is a far better option.

4. Loyalty benefits you can use without claiming

Health check allowances, sterilisation procedures and maternity benefits become available after two or three years in force. You do not have to get sick to use them, which effectively returns part of your premium. I have listed nine of these benefits in detail.

If someone tells you New Zealand does have a policy that pays your money back

Look closely at whether it is actually an investment product with a small amount of cover attached. The fees and returns on that kind of product need to be assessed on their own, not mixed in with the protection.

The point I want to make is that genuine protection insurance in New Zealand is consumption, not savings. It is cheap, it is clean and you can adjust it any time — and those are features, not shortcomings.

Want to know whether your policy has a loyalty discount, or whether you could pause it? Send it to me and I will go through the wording with you.

Want to know which money-related clauses are in your policy? Get in touch with Cornerstone Insurance.

Phone: +64 211 280 727 Email: amy.tao@cornerstonefs.co.nz WeChat: Amytaoingrace