Are you self-insuring your risks?

Self-insurance means planning to use your own savings to cover unexpected costs instead of relying on an insurance policy.

If you’re disciplined about saving, that may sound simple and achievable. But many people underestimate how quickly that hard-earned money can vanish when life takes an unexpected turn.

Some questions to think about

Let’s say you’ve followed the classic advice and saved at least three months’ worth of living expenses. That’s no small feat, but now ask yourself: 

• What if an injury or illness keeps you off work for six months or more? 

• Could your rainy-day fund cover all expenses, including mortgage or rent, bills, groceries, and maybe even medical costs?  

• What if your partner needs to take time off work to care for you?  

• Would they have enough support if you were no longer around? 

These are uncomfortable questions, but they highlight the limits of self-insurance. While savings can be great for short-term emergencies, they’re often not enoug for longer-term setbacks or major health events.  

That’s where personal insurance comes in. 

What insurance offers that savings often don't

A well-structured insurance plan can give you access to the money you need, when you need it – without wiping out your emergency savings or putting other financial goals (like buying a home or retirement) on hold.  

Depending on the insurance policies you have in place, personal insurance could: 

• Replace part of your income if illness or injury stops you working (income protection). 

• Give you faster access to treatment and diagnostics via the private health system, and maybe even cover treatments not funded by Pharmac (health insurance). 

• Support your family financially if you pass away (life insurance). 

• Provide a lump sum upon diagnosis of a qualifying serious health event, to use as you see fit (trauma insurance).  

Many Kiwis are already benefiting from the kind of cover you might be considering, often earlier than you’d expect: 

• According to the Financial Services Council, insured New Zealanders receive well over $1 billion(1) a year in claims payouts across life insurance, trauma insurance and income protection.  

• FSC also revealed that around 25% of health insurance claims(2) are made by people aged under 45. 

Savings + insurance = financial resilience

You don’t have to choose between saving and insuring. In fact, combining the two can be both cost-effective and comprehensive.  

Use your rainy-day fund for smaller, short-term ermergencies, and personal insurance to cover bigger, longer-term risks that are harder to self-fund.  

In fact, having savings can help you optimise your insurance and reduce your premiums. It means you may be able to: 

• Choose a longer waiting period on income protection, knowing your savings can cover you initially.  

• Select a higher excess on your health cover, and use your emergency fund for the upfront costs. 

• Adjust your cover level – provided that still offers appropriate protection for your needs.  

To sum it all up: Why self-insuring can be risky

Self-insurance may sound doable, but here’s what often gets in the way:  

• You haven’t had enough time to build up a big enough savings buffer. 

• Your savings are earmarked for other goals (like a home deposit or retirement). 

• Life throws more than one curveball in quick succession. 

• You’d need to borrow money to fill the gap.  

• Or, like many Kiwis, you find that saving is already tough with everyday expenses.  

Even well-prepared households can be caught off guard. And while crowdfunding platforms may offer community support, they’re not a plan – or a guarantee.  

Let's build your safety net

Being prepared means knowing that, whatever happens, you’ve got financial support in place.  

If you’d like to discuss your insurance needs, get in touch. An Insurance Link adviser can help you understand what cover makes sense for your needs, and tailor it to your goals and budget.  

Talk to us today, and start building a safety net that works for you, your family and your future. 

Source: 

1. Financial Services Council - Life Insurance Industry Spotlight June 2025 

2. Financial Services Council – The Perception Gap and Health Insurance 

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek financial advice. Link Financial Group 2022 Ltd (FSP1004590) holds a licence issued by the Financial Markets Authority to provide financial advice.  

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