Life insurance in New Zealand can be divided into two basic classes: temporary (or term) and permanent insurance.
Term assurance provides life insurance coverage for a specified term. The policy does not accumulate cash value. Term insurance is generally considered “pure” insurance, where the premium buys protection in the event of death and nothing else.
Annual (or yearly) renewable term is a one-year policy, but the insurance company guarantees it will renew the policy on each anniversary up until an agreed age, regardless of the health of the insured person, and with a premium set for the applicant’s age at that time.
Another common type of term insurance is mortgage life insurance, which usually involves a level-premium policy, with the cover declining in line with the amount owing on the mortgage, such that any outstanding amount on the applicant’s mortgage will be paid should the applicant die.
Permanent life insurance remains active until the policy matures, unless the owner fails to pay the premium when due. The policy cannot be cancelled by the insurer for any reason except fraudulent application or unpaid premiums. A permanent insurance policy accumulates a cash value, meaning the owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value (This type of product is no longer available for new customers in New Zealand).