Life insurance and trauma insurance are both critical components of a well-rounded protection plan — but they serve very different purposes. Many New Zealanders have one without the other, leaving significant gaps in their coverage. Here's how to think about both.
What Life Insurance Covers
Life insurance pays a lump sum to your nominated beneficiaries when you die, or if you're diagnosed with a terminal illness (typically with less than 12 months to live). The payout can be used to repay the mortgage, replace lost income, fund your children's education, or simply provide financial security for your family.
What Trauma Insurance Covers
Trauma insurance (also called critical illness cover) pays a lump sum if you're diagnosed with a serious medical condition covered by the policy — and you survive. Policies typically cover 40+ conditions including cancer, heart attack, stroke, major organ transplants, and more. The money is yours to use however you need — medical costs, living expenses, taking time off work to recover.
The Key Difference: Alive vs Not
Life insurance pays when you die. Trauma insurance pays when you survive a serious illness. Statistically, you're far more likely to be diagnosed with a serious illness during your working life than to die — which is why trauma insurance is arguably more important for working-age New Zealanders.
Do You Need Both?
For most people with dependants and a mortgage: yes. Life insurance protects your family if you're gone. Trauma insurance protects your financial position if you're seriously ill and unable to work. They're complementary, not substitutes. Many policies allow you to hold both through the same provider at a bundled discount.
How Much Cover Do You Need?
Life insurance is often calculated as 10x annual income, adjusted for your mortgage balance, dependants, and existing assets. Trauma cover is typically structured to cover your mortgage balance and 12–24 months of income. We'll run personalised calculations as part of your free insurance review.
Get a free insurance review from SKFG and find out what cover you actually need.