Two insurers have pulled out of offering redundancy add-ons to their products for new customers saying job uncertainty is so high they can no longer quantify the risk or price it.
Partners Life and Fidelity Life have both suspended redundancy policies in the last week.
The add-ons cover mortgage repayments if a person loses their job due to redundancy.
• Premium - Insurance - Are you covered? All you need to know about life, income protection and critical illness cover
• Diana Clement: Income protection ignored by most Kiwis
• Why women pay double for income protection insurance
• Why we insure our cars but not our income
Naomi Ballantyne, chief executive of Partners Life, said it made the call after being swamped by queries from advisers about the product amid rising fears of job losses in the wake of the coronavirus clamp-downs.
"What we are basically saying is that all new clients were likely to have a higher than average chance of being made redundant."
Ballantyne said the situation made it difficult for the insurer to quantify the risk of a person being made redundant.
"We can't quantify it so we can't price it," she said. It was the first time the company had pulled the product off the market.
While redundancy claims rose after the Canterbury earthquakes that was localised and short-term, she said.
"This is nationwide."
Ballantyne said it had some applications in the pipeline when it cut off the policy to new customers and had gone ahead with processing those.
She said most of those asking about the policy would have been worried about their job and it was too late buy insurance at that point.
Ballantyne said if insurers did not make the call to stop offering the product they could end up swamped with claims which could send the business under.
All its current customers with redundancy cover were still covered. Ballantyne said the policy would be reinstated when it could price the risk again.
Fidelity Life chief executive Nadine Tereora said it stopped offering redundancy cover on Wednesday.
"Due to the impact Covid-19 is having on economic conditions the prudent thing to do in terms of managing our risk was to remove redundancy cover from sale.
"This was effective from 18 March 2020 and will be the case for the foreseeable future."
Tereora said it continued to stand behind its customers with existing redundancy cover.
While redundancy cover is off the table for new customers insurers say they are offering premium relief for those who have lost their job or had a big hit to their income.
Ballantyne said those who could show they had had a 20 per cent hit to their income because of the virus were being offered a six-month premium holiday.
Fidelity Life sent a note to advisers this week urging anyone with concerns about paying their premium to get in touch.
Another insurer, Asteron Life, also sent out a note offering options of a six-month premium holiday, a premium freeze or to drop their cover for a lower cost for those with changing financial circumstances.
AIA, New Zealand's largest life insurer, on Thursday sent out an email to all its customers assuring them that coronavirus would have no impact on their insurance cover.
"Our insurance products do not contain exclusions for pandemics. If you need to make a claim related to Covid-19, as with any other claim, you will simply need to meet the eligibility requirements for your type of cover."
WHAT YOUR INSURANCE COVERS WHEN IT COMES TO CORONAVIRUS
Peter Leitch, a financial adviser at Share, said income protection insurance would cover those who got hit by the virus and could not work provided they met the normal claim criteria.
But it would not pay out if people's workplaces shut down.
"If you cannot go to work income protection policies won't respond to this situation per se as it is not your ability to work that is an issue but rather economic circumstances have restricted your ability to work."
Leitch said life insurance would also pay out if a person died from the Covid-19 virus.
Redundancy cover was not a standard part of income protection cover and had to be added on to the policy, Leitch said.
He also doubted that private health insurance would help much when it came to coronavirus.
"I think in the current situation if you are ill from coronavirus it's most likely to be an acute admission to hospital. Health insurance doesn't cover acute admissions."
Although he said some policies could pay a daily rate to those who were admitted.
But private hospitals were typically set up to handle things like hip and knee replacements with day or overnight stays.
"They won't take high-risk people because they don't have the ability to cover it."
Leitch urged anyone concerned about their policies or paying for them to get in touch with their adviser or insurer.
Tim Fairbrother, a financial adviser at Rival Wealth, said he didn't recommend redundancy cover as it was expensive and typically had a six-month stand-down period.
That means new customers have to wait six months before they become eligible to claim.
He said it was often better to put the money into a rainy day fund which could be built up over time.