This page explains how KiwiCover insurance premiums are calculated.
The premium quoted using the KiwiCover quote engine is the premium which will apply (subject to acceptance) in the first year of your policy. Premiums for each subsequent year will be calculated according to your age at the beginning of each new policy year, and will therefore be different from that quoted. This is a feature which is designed to keep the cost of your cover low, so that you only pay premiums for your current age, and not for any future age.
How Premiums are Calculated
Premiums are calculated for each age and gender, and they simply reflect claim rates for each of those ages and genders in New Zealand. This is a fundamental principle of yearly renewable cover - the premium is calculated based on claim rates for your current age and gender, so that you pay only for the cost of your cover today, and not for the cost of your cover tomorrow and not as a subsidy for someone else’s cover.
Premiums are generally calculated in the following way:
Premium = Premium Rate × Amount of Cover/1,000 × Discount Rate + Policy Fee
Premium rates are usually expressed as a dollar amount per month for each thousand dollars of cover. For example, a premium rate of $0.075 means a rate of 7.5 cents per month for each thousand dollars of
cover. For life insurance, there are four premium rates for each age from 16 to 70 years, corresponding to male, female, smoker and non-smoker rates. The rate which is applicable to you is multiplied by your amount of cover and divided by 1,000, and the premium is then reduced by a discount rate based on the amount of cover you choose.
As explained in the FAQs. non-smoker rates are substantially lower than smoker rates for all ages, with the reduction ranging between 20% and 60% depending on age and gender.
Premiums for trauma insurance are calculated as above. Premiums for permanent disability insurance are calculated similarly, but with an additional occupational class factor. Premiums for income protection insurance are calculated using a rate per $1,200 of annual benefit, with percentage adjustments for smoking status, occupational class, waiting period and benefit type.
Premiums for family protection insurance are calculated as above, but with a conversion factor being applied to the monthly benefit to obtain a cover amount. Premiums for health insurance are calculated using simply a monthly rate for each age and gender, with a percentage discount applied depending on the excess chosen.
The final component of the premium is the policy fee, which reflects the administrative costs of maintaining your policy. This is adjusted each year according to the percentage change in the Consumers Price Index, and is currently set at $5.81 per month.