Elderly couple's plight over expiring life insurance a 'timely reminder' to others, say Kiwi experts

New Zealand insurance experts say an Australian case where a couple has been told their life insurance will expire soon unless they die is a timely reminder for people to get advice and regularly review their policies.

An elderly couple who have paid life insurance for more than 23 years are devastated after being told they wouldn't be paid out unless one of them died soon.

George and Irene Nesbitt, both 89, have paid more than $31,000 in life insurance - but were told the money would expire if one of them didn't die in the next six weeks.

Speaking with A Current Affair, the distressed couple admit they only have a few hundred dollars to their name.

And they're worried their children will have to pick up the bill.

"I wanted to cover our own funeral, I didn't want [our children] to lay out anything," Irene Nesbitt said.

However, the Nesbitts' insurance provider Colonial recently told them their policy would expire before they turned 90.

"I didn't realise that I didn't get any money, I just thought it meant their cover, I had to stop paying at that age.

"I think it's disgusting, I never would have paid into an insurance like that, I would have cut it off," she said.

The couple are struggling to save their fortnightly $1334 pension, while still being forced to pay $161 a month on their worthless life insurance until it expires on January 17.

The Nesbitts were promised an $8000 payout but face losing that when one of the couple turns 90 in six weeks.

"I didn't look at that clause... I didn't realise that meant you didn't get any money," she said.

The couple's daughter Diane said it was heartbreaking to watch her frail parents worry over how they will pay for their own deaths.

"They're 89 - both of them - and they've worked hard all their life... all they've cared about is that we don't have to worry about their funeral costs," Diane said.

"This breaks my heart for my parents."

Colonial Insurance said in a statement it was sorry to hear of the couple's dissatisfaction but was unable to extend its cover on the Nesbitts' policy.

Richard Klipin, chief executive of the Financial Services Council, said in New Zealand term life contracts typically rolled through to age 99 or 100 but they varied across the insurers.

He said people typically bought insurance to help them manage risks and often life insurance related to children or debt or a business.

But usually people's insurance needs changed over time and because life insurance got more expensive the older people were, they often weighed up whether they needed to pay that extra cost if they had no debt or children had left home.

"Whilst it can run through to age 99 or 100 my experience is not many people of that age and stage would have it."

Klipin said getting good advice was key as was regularly reviewing your situation.

"Those folks have paid in for a lot of years and paid for something which isn't what they expected."

He said funeral cover could have been more appropriate.

Fred Dodds, chief executive of the Institute of Financial Advisers, said the couple had likely purchased a type of life insurance called "term life" which would only cover them up to a certain age.

These type of policies are the norm in New Zealand and took over from older style policies which were called whole of life policies which paid out money at a maturity date regardless of whether a person had died or was still alive.

"Whole of life policies haven't been sold here for a long time."

He said term life policies were never designed to be permanent as the risk of insuring a person got too high as they got over a certain age and the premium cost would get too high.

"It is temporary life insurance," he said comparing it to paying an annual premium for car insurance.

Dodds said people often thought because they were paying such high premiums there was a cash value in the insurance but that was not the case.

He said the Australian couple probably took out the policy 20 years ago and forgot what they were told and just kept paying the premium.

Dodds said it was a timely reminder for people to review their insurance on a regular basis.