Self insure or get life insurance calculator
Insurance is a transfer of risk, and you pay for the privilege. The question isn't whether that's worth it — early on, it almost always is. The question is for how long.
This calculator shows what your premiums cost over a lifetime, and how you'd have done investing the same money instead.
The question isn't yes or no. It's until when
Life insurance premiums rise steeply with age, because the risk does. Cover that costs a few hundred a year in your thirties can cost several thousand in your sixties, for the same amount of protection.
Meanwhile the reason you needed it is fading. The mortgage shrinks, the children grow up, the KiwiSaver balance grows.
At some point the two lines cross — the cover costs more than the risk it's protecting you against is worth to you.
Working out roughly where that point sits, for your situation, is the useful exercise.
It's also the one nobody who sells insurance is likely to walk you through.
What "self insuring" actually means
It means carrying the risk yourself, backed by your own assets.
That only works if the assets are genuinely there. Deciding to self insure and then spending the premium money is not self insuring — it's being uninsured.
The calculator assumes you'd invest the difference, and the whole comparison rests on that.
What the calculator does
Enter your premiums, your expected life expectancy and what you'd earn investing the same money. It shows whether you come out ahead or behind, and how long it takes for investing the premiums to leave you better off.
You can set an annual premium increase, plus up to four periods of steeper increases —which matters, because insurance pricing doesn't rise smoothly. It tends to step up in bands as you cross age thresholds.
What the numbers leave out
Insurance isn't only a financial calculation, and the maths can't settle it on its own.
The timing risk. Self insuring works on average. It fails badly in the specific case where you die early, before the assets have built up. That's the whole point of insurance. It's protection against the bad version, not a bet on the average one.
How you'd sleep. Some people carry cover for years past the point the numbers justify it, because the alternative would bother them. That's a legitimate reason, not a mistake.
Your health. Cancel cover and you may not be able to get it back later on the same terms, or at all. Once you're out, you're out. Worth being sure before you cancel something you'd struggle to replace.
Before you decide
If you'd like to work through it with someone who doesn't sell insurance and isn't paid by anyone who does, get in touch for a free 30 minute chat. I'll tell you if you're under-insured too.