Free Life Insurance Calculator for New Zealanders
The DIME methodology gives a structured starting point for life cover: Debt + Income replacement + Mortgage + Education for dependents. Adjust the inputs to see how the components combine into a suggested cover figure.
Your situation
Based on $95,000 income, $500,000 mortgage, and 2 children to support.
About our Life Insurance Needs Calculator
The most-quoted estimate of NZ’s aggregate underinsurance gap sits around $1 trillion in missing sum insured. Most working-age households with mortgages and children have life cover at half or less of what a structured methodology suggests, leaving a meaningful financial gap if the primary earner died.
The DIME approachDIME formulaDebt + Income replacement + Mortgage + Education; a quick way to size life-insurance cover.View in glossary → (Debt + Income replacement + Mortgage + Education) is the most common method NZ insurers and advisers use to size cover. The calculator runs the four components against your inputs and subtracts any existing cover to produce a "suggested cover" figure that gives a useful starting point for the conversation.
Move the income-replacement-years slider between 5 and 10 to see how the period chosen changes the figure. Younger families with school-age children typically pick longer; older families with adult children or substantial savings pick shorter.
How to use it
Enter your annual after-tax income (the take-home pay calculator will produce this from a gross figure). Enter your mortgage balance and other debts. Enter the number of dependent children and any existing cover (workplace group life, KiwiSaver life balance, or savings).
The result panel shows the suggested cover, broken down into the DIME components and the offset for existing cover. The headline figure is the gap to fill with new cover, not the total cover required.
For couples, run the calculator separately for each partner. The suggested cover differs because the income replacement and dependants components apply per earner, while the mortgage clearance is shared.
Why use it
Life cover sizing is the question most NZ households get wrong, usually by under-insuring. Workplace group-life policies often default to 1-3 times salary, which on a $90,000 salary covers $90,000-$270,000. The same household with a $500,000 mortgage and two school-age children typically needs $800,000-$1,200,000 of cover under a DIME analysis. The calculator surfaces the gap between the two.
The same calculator works in reverse for households reviewing existing cover. Plug in the current cover under "existing" and the calculator returns the additional cover needed (or, sometimes, the figure shows existing cover already exceeds the suggested amount, in which case the question shifts to whether the cover can be reduced and the premiums redirected).
For mortgage-paid-off households with adult children, the suggested cover often falls to the size of remaining debts plus a modest income-replacement buffer. The calculator handles this case by setting children-to-support to zero and mortgage to zero; the resulting figure is usually 1-2 years of after-tax income.
The maths behind it
Suggested cover = Mortgage + Other debts + Income replacement + Education costs − Existing cover The DIME approach (Debt + Income + Mortgage + Education) is a structured starting point for sizing life cover, popular among NZ insurers and advisers. Mortgage clears the home loan. Other debts cover credit cards, personal loans, hire purchases. Income replacement is typically calculated as 5-10 years of after-tax income (5 years for households with substantial savings; 10 years for younger families with school-age children). Education is roughly $10,000-$20,000 per child through tertiary. Existing cover (workplace life insurance, KiwiSaver life balances, savings) reduces the new cover required.
Worked example
Ngaire and Brett, family of four in Gisborne, with a $620,000 mortgage and two children aged 6 and 8.
Ngaire and Brett took out a $720,000 mortgage three years ago and have paid it down to $620,000. Brett earns $94,000 as a regional council planner; Ngaire earns $58,000 part-time at a community arts trust. They have two children in primary school.
Sizing cover for Brett (the higher earner): Mortgage $620,000 + other debts $18,000 (car loan + credit card) + income replacement (7 × his $76,000 take-home) $532,000 + education $30,000 ($15,000 × 2 children) = $1,200,000.
Brett’s employer provides $200,000 of group life cover. Net new cover needed: $1,000,000. Sizing the same calculation for Ngaire (lower earner) lands closer to $700,000-$800,000 of new cover.
If they bought level-premium cover at age 38 and 40, an indicative monthly premium for $1,000,000 of cover would be $80-$120 a month each, depending on the insurer and underwriting outcome. Stepped premiums start lower but rise sharply through their 50s and 60s.
Things to keep in mind
- DIME is a starting point, not a recommendation. The figure produced is a methodology output, not financial advice. Real cover decisions depend on the household’s spending pattern, savings, partner’s income, ages of children, expected inheritances, and risk tolerance. A licensed insurance adviser can refine the figure to a specific situation.
- <span class="term" tabindex="0" aria-describedby="term-tip-stepped-premium">Stepped vs level premium<span class="term__tip" role="tooltip" id="term-tip-stepped-premium"><strong>Stepped premium</strong><span class="term__tip-def">Insurance premium that rises each year as the insured ages, often steeply after 50.</span><a href="/glossary/#stepped-premium" class="term__tip-link">View in glossary →</a></span></span>. Stepped premiums rise each year as the insured ages, often steeply after 50. Level premiums stay flat at a fixed dollar amount. Over 30+ years, level premiums usually cost less in total but more upfront; stepped is cheaper at younger ages and more expensive later.
- <span class="term" tabindex="0" aria-describedby="term-tip-underwriting">Underwriting<span class="term__tip" role="tooltip" id="term-tip-underwriting"><strong>Underwriting</strong><span class="term__tip-def">Insurer's process of assessing health, history, and risk before issuing or pricing cover.</span><a href="/glossary/#underwriting" class="term__tip-link">View in glossary →</a></span></span> can adjust the cost. Insurers assess health, lifestyle, occupation, and family history before issuing cover. Pre-existing conditions can result in a "loading" (higher premium), an exclusion (specific conditions not covered), or a decline. Disclosure during underwriting is mandatory; non-disclosure can void a future claim.
- Income replacement period matters. The calculator’s default income replacement is 5-10 years. Younger families with school-age children typically pick the longer end; households with adult children or substantial savings pick shorter. Some methodologies replace income to retirement age (which produces much larger sums).
- Group cover often shrinks at retirement. Workplace group-life policies often end on retirement or job change. The cover figure shown assumes the existing cover stays in place; if the existing cover is workplace-only, it may not be there when most needed (during retirement, when accumulated wealth is also lower).
NZ-specific notes
FAQs
Is the calculator’s figure a recommendation?
No. The figure is the output of the DIME methodology applied to your specific inputs. It is a structured starting point for thinking about cover, not financial advice. Real cover decisions depend on a wider set of personal factors that a licensed adviser can weigh up.
How does life cover differ from trauma or TPD?
Life cover pays a lump sum on death (and sometimes terminal illness diagnosis). Trauma cover pays a lump sum on diagnosis of a specific serious condition (cancer, heart attack, stroke, etc.). TPD pays a lump sum if you become permanently unable to work. Most NZ households need a combination; the calculator focuses on life cover only.
Should I use stepped or level premiums?
Both are valid. Stepped premiums start lower and rise each year; level premiums start higher and stay flat. The breakeven for "lifetime cost" usually sits in the early 50s, though the comparison depends on the insurer’s pricing curve. Sorted and licensed advisers both have NZ-specific calculators that compare the two.
Does my mortgage need its own life insurance?
Some banks sell mortgage protection insurance, which is life cover sized to the mortgage and tied to that specific loan. It is one option, but not always the cheapest; standalone life cover for the same sum insured is often cheaper because the policy is not tied to a single bank’s product.
How does KiwiSaver factor in?
KiwiSaver balances pay out to nominated beneficiaries on death, which can offset some of the life-cover need. The calculator’s "existing cover" input includes KiwiSaver as a starting point for offsetting the calculated need.
Are life insurance premiums tax-deductible?
For most personal life-cover policies, no. Premiums are paid from after-tax income and the eventual lump-sum payout is tax-free in the recipient’s hands. For some business arrangements (key-person insurance), premiums can be deductible, but this is a specialised area best handled by a chartered accountant.
What happens if I move overseas?
Most NZ life policies stay in force when the insured moves overseas, but check the specific policy. Some policies have geographic exclusions (high-risk countries) and some require notification of a move within a specific window. Underwriting on a new policy after moving overseas is harder and more expensive.
References & sources
- Financial Markets Authority, "Financial product disclosure". fma.govt.nz
- Financial Services Complaints Ltd, "Insurance disputes". fscl.org.nz
- Te Ara Ahunga Ora Retirement Commission, "Sorted insurance guide". sorted.org.nz
- NZ Society of Actuaries, "Insurance research". actuaries.org.nz