Do NZ Insurers Tell You How to Use the Money?
– And Why Planning Matters More Than You Think
When you take out a life insurance policy, there’s one big question many people never stop to ask:
“If something happens and a payout is made… does the insurer tell my family how they’re supposed to use the money?”
The short answer? No, they don’t.
But let’s unpack that a little, because while it gives you (or your loved ones) freedom, it also comes with responsibility — and that’s where New Vision Financial Services can help.
Life Insurance = A Lump Sum, No Strings Attached
Most life insurance policies in New Zealand pay out a tax-free lump sum if you pass away (or are diagnosed with a terminal illness, depending on the policy). That money goes to the policy owner or to your estate — and there are no rules from the insurer about what it must be used for.
That means your loved ones can use it for:
Paying off the mortgage
Covering funeral or tangihanga expenses
Managing day-to-day living costs
Investing or saving
Funding education or future plans
Going on a family holiday to release pent up stress
Retail Therapy (within reason)
There’s total freedom in how that money is used — which can be a huge relief during a difficult time.
So, Who Does Decide Where the Money Goes?
That depends on how your policy is structured:
If you own the policy yourself, the payout typically goes to your estate.
If you’ve nominated someone else as the policy owner or beneficiary, the money goes directly to them.
If you haven’t made a will or estate plan, it can get complicated — with delays, confusion, or even disputes.
This is where having clear advice and a good structure makes a big difference.
At New Vision Financial Services, we help our clients make sure their life insurance, wills, and (where needed) trusts all work together, so nothing is left to chance. We work with our clients and other experts to make sure everyone is on the same page.
Freedom Is Great — But So Is Clarity
While insurers won’t dictate how the money is used, you still can — through smart planning and open conversations. Without it, your family may be left guessing about what you would have wanted.
Here’s what we recommend:
✅ Talk to your family about your insurance and intentions
✅ Have a will that clearly sets out how your estate (including any life insurance) should be managed
✅ Review your policy regularly to make sure it still fits your life stage and goals
✅ Work with a financial adviser who can connect the dots between insurance, estate planning, and long-term peace of mind
At New Vision, we believe life insurance should be more than a transaction — it should be part of a bigger picture that protects your people, your legacy, and your vision for the future.
The Bottom Line
NZ insurers won’t tell your family how to use your life insurance money — and that flexibility is a powerful thing. But freedom without planning can lead to confusion. The best outcomes happen when you leave clear instructions and have the right structures in place.
Need help reviewing your policy or making sure your insurance and estate plans are aligned?
Get in touch with New Vision Financial Services — we’ll help you make sense of it all, and build a plan that works for your life, your whānau, and your future.
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Nimalka Perera
Business Development Manager
New Vision Financial Services
Plan your future and let us help you have peace of mind along the way.
