Life Insurance: The Most Overlooked Asset in Your Entire Portfolio

Let’s not tiptoe around it: your life insurance might just be the most valuable thing you own after your home. And for some of you, depending on the sum insured, it might be the most valuable. Yet too many Kiwis don’t fully appreciate just how powerful this contract in their bottom drawer really is.

Whether you're paying premiums monthly or annually, whether it's stepped or level, your life insurance is not a “nice to have”. It's not some optional extra. It's a strategic, tax-free asset class all of its own, and it deserves a place of pride in your financial landscape.

You already made the right choice

If you're reading this, chances are you already have life insurance. Good. You’ve already done what most people delay, or worse, never get around to. But even so, it’s worth reminding yourself why that choice was so important.

Because the truth is, it wasn’t just a financial decision. It was a deeply human one. You made a commitment to the people who depend on you. You locked in a contract that says, “If something happens to me, there will be money. Real, tax-free money. To help the people I love.”

You can’t put a price on that peace of mind… except, actually, you can. It’s right there in your policy: $500,000. $1 million. More. That’s a significant asset. It's wealth that will transfer instantly and tax-free when it's needed most.

Life insurance is not a cost. It's a class of asset

Here’s the part most people miss: life insurance isn't just about covering final expenses or the mortgage. It's about legacy. It's about wealth preservation. And if you're holding a level life insurance policy, you've taken it to a whole other level.

Think about this:

• Level premiums mean you’ve locked in a low rate now, and over time, this will almost certainly save you tens, or even hundreds of thousands in premiums compared to stepped.

• Unlike a house, your life insurance doesn’t require maintenance, rates, or renovations.

• And unlike KiwiSaver or other investments, it pays out completely tax-free if it's to an individual or estate. No income tax, no death tax, no bright-line tax.

This isn’t just a policy, it’s a smart financial asset, carefully designed to do one thing: deliver maximum value when it matters most.

Two schools of thought

There are two main schools of thought in life insurance:

1. The temporary cover approach: where the policy is stepped, and the sum assured drops over time as you pay down debt and accumulate other assets. This is a cost-management strategy.

2. The long-term asset approach: where the sum assured stays level, the premium is fixed early, and the policy is intended not just to cover debt, but to leave a significant, tax-free nest egg.

There’s merit to both, depending on your goals and life stage. But it must be said: clients who’ve committed to a level strategy will, in the long run, often come out far ahead, especially those planning to leave money behind for kids or grandkids.

The stepped clients may save money today, but they’ll pay more in premiums later. The level clients? They're locking in a financial instrument that might be the most cost-effective wealth transfer strategy available in New Zealand.

So what should you do with this information?

If you’re on the level premium path, hold tight. You’ve made a brilliant long-term move. That policy might cost a little more in the early years, but the long-term savings and eventual payout make it an absolute gem.

If you're on a stepped premium and haven’t reviewed it in a while, it could be time to reassess whether it's still serving your goals. There’s no one-size-fits-all answer, but there’s never any harm in running the numbers.

You can get started on a review here, or, if you're interested in reading more about the structure of personal insurance options, we’ve got a dedicated resource for that too.

The power of a promise

At its heart, life insurance is a promise. A contract that will be honoured no matter what happens to you. It's immune to market crashes. It doesn’t require luck or timing. And it will deliver its full value at the precise moment it's needed.

That’s more than just “peace of mind”. That’s real, tangible, strategic value. And if you’ve got it, especially if you’ve had it for a while, it’s something to be proud of. You made a smart, generous, and strategic decision. Don’t forget that.

A reminder for all policyholders

Life insurance isn’t an afterthought, it’s a cornerstone. For many Kiwis, it’s a key part of their wealth strategy and one of the only tools available to instantly provide significant, tax-free capital to loved ones. Whether you’re using it for protection, planning, or legacy, it deserves recognition as one of your most valuable assets.

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The information in this article is general information only and is not intended as financial, medical, health, nutritional, tax or other advice. It does not take into account any individual’s personal situation or needs. You should consider obtaining professional advice from a financial adviser and/or tax specialist, or medical or health practitioner, in relation to your own circumstances and before acting on this information.