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Life Insurance Claims Statistics: What Causes Claims and How Payouts Are Used

Our guide shares real life insurance claims data from LifeDirect and outlines how cancer causes 55% of claims, the average payout is $350,000, and that many households are underinsured.
Updated 16 February 2026

Summary
  • Life insurance pays a lump sum to your family if you die. It sounds simple, but the statistics behind life insurance claims tell an important story about why New Zealanders die, how much their families receive, and whether the coverage they have is actually enough.
  • We obtained claims data from LifeDirect, one of New Zealand's largest independent insurance advisers, covering their life insurance portfolio over the last 12 months.
  • This guide reveals what conditions trigger claims, how long payouts take, and - critically - how families use the money they receive.
  • LifeDirect paid $32.1 million in life insurance and terminal illness claims over the past year, with an average payout of $350,000. Cancer causes 55% of claims, followed by heart conditions at 22%. The average time from claim to payout is 30-45 days. 

Our View
  • The life insurance statistics paint a sobering picture. Cancer alone causes more than half of all claims - a reminder that this disease does not just affect the elderly. Working-age New Zealanders die from cancer, leaving families with mortgages, children to raise, and futures to fund.
  • The average payout of $350,000 sounds like a lot until you consider what it needs to cover - the median Auckland house price exceeds $1 million. Even outside Auckland, paying off a mortgage takes a substantial portion of any payout. Then there is income replacement - if the deceased was earning $80,000 per year, $350,000 provides only about four years of income replacement before running out.
  • This is why the underinsurance statistics matter. Industry estimates shared by LifeDirect's team with our researchers suggest about 85% of households are underinsured, typically by 28-40%. The average policyholder has only 65% of the cover they actually need. When a claim happens, the shortfall becomes a real problem - families who expected financial security find themselves still struggling.
  • There is some good news - claims are rarely declined. Industry-wide, only 3-5% of claims are rejected, mainly for non-disclosure. If you are honest when you apply and keep your premiums paid, your family will almost certainly receive the payout when they need it.
  • Most New Zealanders need more life insurance than they think, and the cost of adequate cover is lower than most people assume. The question is not whether you can afford life insurance - it is whether your family can afford for you not to have it.

 To help you understand life insurance claims, conditions, coverage and payouts, our guide covers:
​This guide presents claims and policy data from two sources:
  1. LifeDirect data: Claims and policy information from LifeDirect, one of New Zealand's largest independent insurance advisers. Total life and terminal illness claims paid over the past 12 months reached $32.1 million.
  2. Industry statistics: Aggregated data from across the New Zealand insurance industry, sourced from industry bodies and insurer publications.

Important: About 75% of LifeDirect's clients received advice through their adviser network, with 25% purchasing directly. This may influence some statistics compared to the broader market.

Disclaimer: This guide is for informational purposes only and does not constitute financial advice. Your individual circumstances will determine appropriate cover levels. We suggest getting an online quote and talking to an adviser before making any decision.

Key Life Insurance Claims Statistics

​The following statistics come from LifeDirect's life insurance claims over the past 12 months, combined with industry-wide data.
Statistic LifeDirect Industry Average
Total Claims Paid (Last 12 Months) 24 claims ~5,000 claims
Total Payout Amount $32.1 million N/A
Average Payout $350,000 $350,000
Payout Range $10,000–$1,000,000+ $10,000–$1,000,000+
Average Time to Payout 30–45 days 2–6 weeks
Leading Cause of Claims Cancer (55%) Cancer (40%)
Declined Claims Minimal 3–5%
Underinsurance Rate ~85% of households ~85% of households
Average Underinsurance Gap 28–40% below need 28–40% below need
Bundled Cover (Life + Trauma + TPD) ~70% of clients N/A
Important: LifeDirect processed 24 life insurance claims in the past 12 months. Industry-wide, approximately 5,000 life insurance claims are paid annually across New Zealand. LifeDirect's total life and terminal illness payouts reached $32.1 million.

Declined Claims: Industry-wide, 3-5% of claims are declined, almost always for non-disclosure of health conditions when applying.
Find out what life insurance costs for your age and situation
  • Most New Zealanders don't realise how affordable life insurance can be - or how far short their current cover falls. The average payout is $350,000, but most families need $1 million or more.
  • In under 30 seconds, you can compare live quotes from AIA, Fidelity, Chubb, Partners Life and others based on your age, health, and cover needs.

What Causes Life Insurance Claims?

Understanding what kills working-age New Zealanders helps you assess risk and understand why life insurance matters.
Cause of Death LifeDirect Claims Industry Average Common Conditions
Cancer 55% 40% Breast cancer, bowel cancer, lung cancer, melanoma, prostate cancer
Heart-Related 22% 25% Heart attack, cardiac arrest, heart failure, cardiovascular disease
Organ Failure and Sepsis 18% N/A Kidney failure, liver failure, sepsis, multi-organ failure
Accidents and Coroner-Related 5% 15% Vehicle crashes, workplace incidents, sudden deaths requiring coronial inquiry

1. Cancer (55% of LifeDirect claims, 40% industry)

Cancer is the leading cause of life insurance claims by a significant margin. More than half of LifeDirect's life insurance payouts followed cancer deaths - higher than the 40% industry average, though both figures are substantial.

Cancer does not discriminate by age. While risk increases with age, working-age New Zealanders in their 30s, 40s, and 50s are diagnosed regularly. Breast cancer, bowel cancer, lung cancer, melanoma, and prostate cancer are among the most common. Many cancers are survivable with modern treatment, but aggressive or late-detected cancers still claim lives.

Terminal illness benefit: Most life insurance policies include a terminal illness benefit that pays out the sum insured when someone is diagnosed with a terminal condition (typically life expectancy under 12 months). This means the policyholder can access the money themselves rather than waiting for death - to pay for treatment, spend time with family, or get affairs in order.

2. Heart-Related (22% of LifeDirect claims, 25% industry)

Heart attacks, cardiac arrest, heart failure, and cardiovascular disease cause about a quarter of life insurance claims. These deaths often occur suddenly - someone goes to work healthy and does not come home.

Heart disease risk factors include family history, smoking, obesity, diabetes, high blood pressure, and high cholesterol. Many of these factors will affect your life insurance premium - another reason to maintain good health while you are young and premiums are low.

3. Organ Failure and Sepsis (18% of LifeDirect claims)

Kidney failure, liver failure, sepsis, and multi-organ failure account for about 18% of claims. These deaths often follow other health conditions - someone being treated for one condition develops complications that prove fatal.

4. Accidents and Coroner-Related (5% LifeDirect, 15% industry)

Accidents - vehicle crashes, workplace incidents, and other sudden deaths - cause fewer claims than many people expect. LifeDirect's 5% is lower than the 15% industry average, possibly reflecting their client demographics (fewer young, high-risk individuals).

Know This: Deaths requiring coronial inquiry can delay payouts while the coroner completes their investigation. This is why adequate savings or other insurance (like income protection for the surviving spouse) matters - the family may need to manage for several months before receiving the life insurance payout.
Compare life insurance quotes for your situation
  • Premiums vary significantly by age, health, and smoker status - but even comprehensive cover costs less than most people expect. The average policyholder pays far less than the $350,000 their family would receive.
  • In under 30 seconds, you can compare quotes from AIA, Fidelity, Chubb, Partners Life and others based on your actual circumstances.

How Families Use Life Insurance Payouts

Understanding how payouts are actually used helps you calculate how much cover you need.
Use of Payout % of Payout What It Covers Key Consideration
Mortgage Repayment 50% Clearing the home loan so the family can stay in the house Your cover should be at least equal to your mortgage balance before considering other needs
Children's Education 30% School fees, university costs, future opportunities $100,000–$300,000 per child from primary through university is realistic
Income Replacement 20% Living expenses, bills, transition period for surviving spouse $350,000 provides only 3.5 years of replacement for a $100,000 salary – often the biggest shortfall

1. Mortgage Repayment (50%)

Half of all life insurance payouts go towards paying off the mortgage. This is the primary goal for most families - ensuring the surviving spouse and children can stay in the family home without the burden of mortgage payments.

This is why many advisers suggest your life insurance cover should be at least equal to your mortgage balance - and ideally more. A $500,000 mortgage needs at least $500,000 in cover just to clear the debt, before considering any other needs. Our life insurance calculator has more insights.

2. Children's Education (30%)

About 30% of payouts are allocated to children's education - school fees, university costs, and ensuring children have the same opportunities they would have had with both parents alive.

A child's education from primary through university can easily cost $100,000-$300,000 depending on school choices. Multiply by the number of children to understand the true cost. Many families underestimate this expense when calculating life insurance needs.

3. Income Replacement (20%)

The remaining 20% typically goes toward replacing lost income - covering living expenses while the surviving spouse adjusts, bridges any income gap, or funds the transition period.

This is often where payouts fall short. If someone earning $100,000 per year dies, a $350,000 payout provides only 3.5 years of income replacement - assuming the entire payout went to income replacement, which it will not. The surviving family still needs to eat, pay bills, and maintain their lives.​

How Much Life Insurance Do You Need?

The statistics and commentary from LifeDirect suggest most people need more than they have. Here is a framework for calculating adequate cover, which you can consider alongside our Life Insurance Calculator:
  1. Mortgage and debts: Your outstanding mortgage balance plus any other debts (car loans, personal loans, credit cards) that your family would need to repay.
  2. Income replacement: Your annual income multiplied by the number of years your family would need support. A common rule is 10x annual income, but this varies based on circumstances.
  3. Children's education: Estimated education costs per child from their current age through university. $100,000-$200,000 per child is not unusual.
  4. Final expenses: Funeral costs ($10,000-$15,000), estate administration, and other immediate expenses.
  5. Less existing resources: Subtract savings, existing life insurance and any other resources your family could access.

Example: A 40-year-old earning $100,000 with a $600,000 mortgage, two children (education costs $150,000 each), and wanting 5 years income replacement may need: $600,000 + $500,000 + $300,000 + $15,000 = $1,415,000. The average cover of $550,000 falls well short.
See how much life insurance you actually need
  • Our life insurance calculator shows you the gap between what you have and what your family would need - factoring in your mortgage, income, children's education and debts.
  • In under 30 seconds, you can compare live quotes from leading insurers and see exactly what adequate cover would cost.

How Life Insurance Claims Are Paid

Understanding the claims process helps your family know what to expect during an already difficult time:
  • Step 1 - Notify the insurer or adviser: Contact the insurer or your adviser as soon as possible after death. If the policy was arranged through an adviser like LifeDirect, they will guide the family through every step. Do not wait for all paperwork to be ready before making first contact.
  • Step 2 - Gather documents: The insurer will need a certified copy of the death certificate, the original policy documents (or policy number), completed claim forms, and proof of identity for the beneficiary or estate executor.
  • Step 3 - Insurer assessment: The insurer reviews the claim against the policy. For straightforward claims (natural death, illness), this is typically a formality. Deaths requiring coronial investigation or involving the suicide exclusion period (usually 13 months) may take longer to assess.
  • Step 4 - Payout: Most claims are paid within 30-45 days. Straightforward cases can settle in as little as 2 weeks. The full sum insured is paid tax-free to the nominated beneficiaries or the estate. If a terminal illness benefit has already been paid, this amount is deducted from the death benefit.
  • Step 5 - Support after payout: Consider seeking financial advice on how to allocate the payout. The data shows most families use 50% for the mortgage, 30% for children's education, and 20% for income replacement - but your situation will determine the right split.
  • Know This: The single most important thing you can do for your family is ensure they know the policy exists, who the insurer is, and how to contact your adviser. Many claims are delayed simply because families do not know a policy is in place or cannot locate the details.

Frequently Asked Questions

How long does it take to receive a life insurance payout?

Typically 2-4 weeks for straightforward claims, or 30-45 days for more complex situations. Deaths requiring coronial investigation can take longer - sometimes several months - while the coroner completes their inquiry. Having certified copies of the death certificate and policy documents ready speeds the process.

What percentage of life insurance claims are declined?

Only 3-5% industry-wide, with LifeDirect reporting even fewer declines. The main reason for decline is non-disclosure - failing to tell the insurer about health conditions when you applied. Deaths within the suicide exclusion period (usually 13 months) may also be declined. If you disclose everything honestly when applying, your claim will almost certainly be paid.

What is the average life insurance payout in New Zealand?

$350,000 based on both LifeDirect data and industry statistics. However, payouts range from $10,000 (older or partial policies) to over $1,000,000 for comprehensive cover. The average does not mean adequate - most families need more than $350,000 to maintain their lifestyle.

Does life insurance pay out for any cause of death?

Generally yes, with limited exceptions. Most policies exclude suicide within the first 13 months. Deaths resulting from criminal activity, war, or specific excluded activities may not be covered. Deaths from pre-existing conditions that were not disclosed are often contested. For the vast majority of deaths - illness, accidents, natural causes - the policy pays out.

What is a terminal illness benefit?

Most life insurance policies include a terminal illness benefit that pays the sum insured when someone is diagnosed with a terminal condition (typically defined as life expectancy under 12 months). This allows the policyholder to access the money while still alive - to pay for treatment, spend time with family, or arrange their affairs. The terminal illness payout reduces the death benefit dollar for dollar.

Should I bundle life insurance with trauma and Total and Permanent Disability (TPD) cover?

For reference, we understand about 70% of LifeDirect clients do. Bundling provides comprehensive protection - life insurance pays if you die, trauma insurance pays a lump sum if you are diagnosed with a serious condition like cancer or heart attack (even if you survive), and TPD pays if you become totally and permanently disabled.

Each covers different scenarios - the question is whether you want protection for death only, or for serious illness and disability as well.

How much does life insurance cost?

Premiums vary significantly based on age, health, smoker status, occupation, and amount of cover. We suggest starting with our life insurance guide and getting a quote from a range of insurers.

What happens to my life insurance if I change jobs?

Personal life insurance policies stay with you regardless of employment - they are not tied to your job. Employer-provided life insurance typically ends when you leave that employer, which is why having your own policy provides certainty. Some occupation changes may affect premiums if you move to a higher-risk profession.

Is life insurance payout taxable?

No - life insurance payouts to beneficiaries are not subject to income tax in New Zealand. The full sum insured goes to your nominated beneficiaries tax-free. This is one advantage life insurance has over other assets that may have tax implications when transferred.

What is the best life insurance company in New Zealand?

AIA is the most popular, holding a significant share of the market and LifeDirect's portfolio. However, "best" depends on your circumstances - health, occupation, budget, and specific needs. Different insurers have different strengths. Working with an independent adviser who can compare multiple insurers is the best way to find appropriate cover.

Do I need life insurance if I have no dependents?

Your need is lower but not necessarily zero. Consider -  do you have debts that would pass to your estate? Would someone (parents, siblings) face financial burden from your death? Do you want to leave a legacy? For many single people without dependents, minimal cover to clear debts and cover funeral costs may be appropriate, with the option to increase later if circumstances change.

How do I make a life insurance claim?

Contact your insurer or adviser as soon as possible after death. You will need the death certificate, policy documents, and claim forms. If you bought through an adviser like LifeDirect, they will help manage the claims process. The insurer will verify the claim and typically pay within 2-6 weeks for straightforward cases.​
Compare life insurance quotes for your situation
  • Premiums vary significantly by age, health, and smoker status - but even comprehensive cover costs less than most people expect. The average policyholder pays far less than the $350,000 their family would receive.
  • In under 30 seconds, you can compare quotes from AIA, Fidelity, Chubb, Partners Life and others based on your actual circumstances.
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