NZ Level 5 Life, Disability and Health Insurance common mistakes
NZ Level 5 Life, Disability and Health Insurance · Understand the traps and how to avoid them.
Treating the Financial Markets Conduct Act 2013 and the Financial Services Legislation Amendment Act 2019 as interchangeable, or describing adviser duties under the old Financial Advisers Act 2008 when a question asks about the current regime.
Candidates study from older summaries or memory of pre-2019 terminology and don't realise the licensing and conduct framework changed; they answer with repealed provisions.
What to do instead
Build a one-page timeline mapping old to new: FAA 2008 to FSLAA 2019, authorised financial adviser to financial adviser under a financial advice provider licence, and the Code of Professional Conduct for Financial Advice Services replacing the old code. For each regime, list who must be licensed, what disclosure is required, and the priority-to-client duty, then test yourself by rewriting any practice answer in current terminology.
Confusing the roles of the regulator and dispute bodies, for example attributing dispute resolution to the FMA or saying the RBNZ handles insurance conduct, instead of naming the FMA for conduct/licensing and IFSO (or the relevant scheme) for disputes.
Several agencies appear across the syllabus and candidates learn names as a list without attaching each to a specific function, so they guess under time pressure.
What to do instead
Create a table with columns for agency, statutory source, and three concrete functions (licensing, monitoring, dispute resolution, prudential supervision, ombudsman). Populate it for the FMA, RBNZ, IFSO, and the relevant privacy and human rights bodies, then answer ten 'who does what' scenarios aloud until the mapping is automatic.
Describing life policy structures loosely, for example treating term life, whole-of-life, and endowment as variations of the same product, or failing to state what happens to premiums, cash value, and cover at expiry.
Candidates memorise product names without the mechanics of premium structure, cash value accumulation, and expiry, so comparisons collapse into vague labels.
What to do instead
For each structure (level term, decreasing term, whole-of-life, endowment, and investment-linked), write four lines: premium pattern, cash/surrender value, cover duration, and what the beneficiary receives. Then draw the death benefit over time for each on the same axes and explain the differences to a study partner without notes.
Mixing up the definitions and triggers of disability products, for example applying an 'any occupation' test where the policy specifies 'own occupation', or ignoring the waiting period and benefit period when calculating a payout.
Disability products share vocabulary but differ on definition of disability, offset provisions, and indemnity versus agreed-value basis; candidates skim the definitions and answer from the product name.
What to do instead
For each product type, write the exact definition of disability, the waiting period, the benefit period, the offset rules, and the basis (indemnity or agreed value). Then work three numerical claim scenarios where the answer changes depending on the definition, and note which clause drives each result.
Answering health and medical insurance questions without distinguishing the roles of public funding, the insurer, and the policy exclusions, such as assuming all treatment is covered or overlooking pre-existing condition stand-downs.
Candidates generalise from personal experience of the public system and don't separate what the public system funds from what a private policy adds, so they miss exclusion and stand-down mechanics.
What to do instead
Build a comparison table of public entitlement versus typical private cover for hospital, specialist, and day-to-day benefits, then add a column for common exclusions and stand-down periods. Practise explaining to a hypothetical client what is and is not covered in two specific scenarios.
Skipping a structured fact-find and jumping to a product recommendation, so the answer names a policy without recording income, dependants, existing cover, debts, or objectives.
Under exam pressure candidates write the answer they think is expected rather than demonstrating the process, and they underestimate how much of the mark sits in the evidence of needs analysis.
What to do instead
Memorise a fact-find checklist (personal details, dependants, income and expenses, assets and liabilities, existing cover, health, objectives, risk tolerance) and use it as the skeleton for every recommendation answer. Practise writing a recommendation where the first half is fact-find summary and the second half is the product, so the link between need and product is explicit.
Presenting a product comparison as a feature list without linking features to the client's stated needs, or recommending the cheapest option without justifying suitability against the client's objectives.
Candidates confuse product knowledge with advice quality and believe more features or lower premiums equal a better answer, so suitability reasoning is thin or absent.
What to do instead
Use a three-column comparison: client need, product feature that addresses it, and evidence or trade-off. For every recommendation, write one sentence naming the client objective it serves and one sentence naming what the client gives up. Practise rejecting a cheap product for a specific client with a reasoned justification.
Treating disclosure as a one-off event at application, missing the duty to answer questions honestly and the consequences of non-disclosure, including how an insurer may avoid a policy or adjust a claim.
Candidates learn disclosure as a definition rather than a continuing obligation with legal consequences, and they don't connect it to the claims stage where it is tested.
What to do instead
Write out the disclosure duty from both sides: what the applicant must do, what the insurer must ask, and what remedies follow from innocent, negligent, and fraudulent non-disclosure. Then take a claim scenario and trace how a missed medical history would be treated, citing the relevant statutory principle rather than a product name.
Describing the claims process as a single step ('lodge the claim and get paid') without the notification timeframe, required evidence, assessment, and the client-service obligations at each stage.
Candidates without claims exposure compress the process and omit the points where claims fail, such as late notification or incomplete evidence, so their answers lack the operational detail markers reward.
What to do instead
Map the claims lifecycle as a numbered flow: notification, evidence gathering, assessment against the policy definition, decision, payment or decline, and review or dispute rights. For each stage, note the timeframe, the documents required, and the adviser's client-service action. Then write a short client letter explaining a declined claim with empathy and clear next steps.
Ignoring the priority-to-client and conflict-of-interest duties when answering commission or remuneration questions, and instead justifying advice by reference to what the adviser or provider earns.
Candidates separate ethics from commercial reality and don't apply the conduct standards to concrete remuneration scenarios, so they miss the point that client interest must come first.
What to do instead
For three remuneration structures (upfront commission, trail commission, fee-for-service), write how each could create a conflict and the specific steps an adviser must take to manage it, including disclosure and documenting why the recommendation suits the client. Practise rewriting a commission-driven justification into a client-need justification.