The short answer
New Zealanders mostly buy six covers. Life pays a lump sum when you die. Trauma pays a lump sum when you are diagnosed with a listed serious illness. Income protection pays a monthly amount while you cannot work. Health pays for private medical treatment so you are not waiting in the public queue. Mortgage protection is a narrower income protection sized to your repayments. Business cover keeps a company running when a key person stops.
Two of them — trauma and income protection — exist almost entirely because ACC covers accidents but not illness.
Last reviewed 2026-07-30
The one distinction that explains everything
If you learn one thing on this site, learn this: New Zealand has ACC, and ACC is generous — but it is an accident scheme. Fall off a ladder and ACC is there. Get diagnosed with cancer, MS, a heart condition or a back problem that did not come from a specific accident, and ACC is not there at all.
Almost every personal insurance product sold in this country is designed around that single sentence. Once you see it, the product names stop being confusing.
Cover by cover
1. Life insurance — a lump sum for the people left behind
Pays an agreed amount to your estate or nominated people when you die. It is the simplest product in the market and usually the cheapest per dollar of cover, because the insurer is paying once, on an event that is certain but usually far away. Most policies also pay early on terminal illness diagnosis.
The question it answers: if my income stopped permanently tomorrow, would the people who depend on it be okay? Full guide to life insurance in NZ →
2. Trauma cover — a lump sum on diagnosis, while you are still alive
Also sold as "critical illness". Pays a tax-free lump sum when you are diagnosed with one of a listed set of conditions — cancer of a specified severity, heart attack, stroke, major organ failure and so on. You do not have to be unable to work, and you do not have to spend it on medical bills. People use it to clear a mortgage, pay for treatment that is not publicly funded, or simply to buy a year of not worrying.
The question it answers: if I got seriously ill, what would I do with a pile of cash right now? Full guide to trauma cover →
3. Income protection — a monthly payment while you cannot work
Replaces a percentage of your income (commonly up to about 75%) after a chosen stand-down period, for a chosen benefit period. It is the only product that covers the long, boring middle of a serious illness: the eighteen months where you are not dying and not recovered, and the mortgage is still due.
The question it answers: how long could I actually go without a pay cheque? Full guide to income protection →
4. Health insurance — skipping the public waiting list
Pays for private treatment: surgery, specialist consultations, diagnostics, and — the part most people underrate — non-Pharmac-funded cancer drugs. New Zealand's public system will treat you. Health insurance largely buys you timing and choice, which for a working-age person with a mortgage is not a small thing.
The question it answers: if I needed a hip, a scan or a specialist, could I afford to wait? Full guide to health insurance →
5. Mortgage protection — income protection, sized to the house
A narrower cover that replaces your mortgage or rent payments rather than your income. Cheaper, simpler, and popular with first-home buyers whose budget is already stretched. The trade-off is that it protects the roof and nothing else — groceries, power and childcare do not stop.
Income protection vs mortgage protection, compared →
6. Business and key person cover
For companies rather than families. Key person cover pays the business a lump sum if someone the business depends on cannot work. Shareholder protection funds the buy-out of a departing owner's shares. There is also business expenses cover, which keeps the lights on — rent, leases, staff — while an owner-operator is out.
Full guide to business cover →
Nobody needs all six. Most people need two or three, sized properly.
So which do you actually need?
There is no universal answer and anyone who gives you one is selling something. But the ordering question is usually the same, and it is not "which product is best" — it is "what would break first?"
- Single, renting, no dependants, no debt. Nobody is financially harmed if you die. But you would still be harmed if you could not work. Income protection and health tend to matter more than life cover.
- Mortgage, partner, young kids. This is the sharpest need in the country. A lump sum that clears the mortgage plus something that replaces income is the usual starting shape.
- Self-employed or contracting. No sick leave, no employer scheme, and often no ACC CoverPlus Extra set up properly. Income protection carries the most weight here.
- Mortgage nearly gone, kids independent. The need for large life cover often falls away. Health and trauma tend to become the priority as premiums start to climb with age.
Work through your own version with the cover calculator, or read the ACC gap page first if you have never looked at it.
Common follow-up questions
Can I hold more than one type at once?
Yes, and most people who are properly covered do. The common combination is life cover sized to the mortgage, income protection sized to the mortgage plus living costs, and health cover. Trauma is often added in a smaller amount as a buffer for the first year of a diagnosis, because it pays on diagnosis rather than on inability to work.
Does one policy ever reduce another payout?
It can. Some trauma policies are sold as "accelerated" — bundled with life cover, so a trauma claim reduces the life sum insured by the amount paid. Standalone trauma does not do this but costs more. This is exactly the kind of structural detail that is easy to get wrong buying direct, and it only shows up at claim time.
Is KiwiSaver or my mortgage lender insurance enough?
Lender-arranged cover is usually sized to the lender's interest rather than yours, and the bank is often the beneficiary. It is not automatically bad, but it is worth knowing what it actually pays and to whom before you assume the family is covered.
Keep reading
This page is general information about how insurance works in New Zealand. It is not regulated financial advice and it does not take your situation into account. For advice about your own cover, talk to a licensed financial adviser.