Income protection insurance
Your income continues when your ability to earn it stops.
What income protection pays, and when
Income protection pays a monthly benefit while illness or injury prevents you from working. It begins after a wait period you choose, and it continues for a benefit period you choose, for as long as you remain unable to work.
Of all the personal covers, this is the one that most closely resembles the thing it replaces. A salary arrives every month. So does this.
It is also the cover New Zealanders are least likely to hold, largely because of an assumption about ACC that does not survive examination.
What ACC does and does not do
ACC pays weekly compensation of up to 80 per cent of your income if you cannot work because of an injury, generally from the eighth day. Within its scope it is a good scheme, and better than most countries have.
Its scope is accidents. ACC's published position is that it does not cover illness, sickness or contagious diseases, conditions related to ageing, or conditions that develop over time unless a work activity is causing them.
Long absences from work are far more often caused by illness than by accident. For that entire category, there is no ACC. There is whatever you arranged.
Source: ACC, Weekly compensation and Injuries we do not cover, acc.co.nz, accessed 9 August 2026.
The two settings that decide the premium
The wait period is how long you go unpaid before the benefit starts, commonly four, eight, thirteen or twenty-six weeks. Lengthening it reduces the premium sharply, because most claims are short. The right wait period is a function of your savings, your sick leave and, for the self-employed, how long the business can carry you.
The benefit period is how long payments continue: two years, five years, or to age sixty-five or seventy. Two-year cover is affordable and answers the common case. To-age-sixty-five cover answers the case that ruins households. If the budget forces a choice, we would take a longer benefit period with a longer wait, rather than the reverse.
Most people arrange this the other way round, because a short wait period feels like better value at the point of purchase and the long tail feels theoretical.
Who tends to need it most
The self-employed
No sick leave, no employer cover, and a business whose income often depends on the owner turning up.
Single-income households
Where one salary carries the mortgage, there is no second income to fall back on for the months in question.
Professionals with high fixed costs
School fees, a large mortgage and a lifestyle built around a reliable monthly figure do not adjust quickly.
Commission and variable earners
Where income moves, how the policy defines and proves earnings matters more than the headline percentage.
Contractors
Between contracts is not the same as unable to work, and the wording needs to reflect how you actually earn.
Recent buyers
The years immediately after a large mortgage is drawn are the years with the least room for a gap in income.
Where income protection goes wrong
Cover sized against a salary from six years ago. A short wait period bought at the expense of a short benefit period. An occupation definition that assumed you would take any job rather than your own. Mental health exclusions accepted without a conversation about what they actually exclude, when mental health conditions are among the more common causes of long absences from work.
And the most common of all: no cover at all, on the strength of an assumption about ACC.
At claim time
This is the only cover that has to be claimed again and again. Every benefit period needs fresh medical certification, and a gap in the paperwork becomes a gap in the income, in a month when a household has nothing to absorb it with.
We set the claim up and then we keep it running: the certificates, the periodic reviews, the offsets against ACC, and the return-to-work discussions that decide whether a partial benefit continues while you build back up.
Long claims get reviewed. Being represented while that happens is a different experience from being assessed alone.
Common questions
How much of my income can I insure?
Insurers cap the monthly benefit at a proportion of your pre-tax earnings, commonly around three quarters, and the exact limit and the definition of earnings differ between them. The cap exists to leave a financial reason to return to work. For business owners and commission earners, how earnings are defined matters as much as the percentage.
What is the difference between indemnity and agreed value cover?
Indemnity cover proves your income at the time of claim. Agreed value cover fixes the insurable income when the policy is issued, so a later fall in earnings does not reduce the benefit. Agreed value costs more, requires financial evidence up front, and availability in the New Zealand market has narrowed. For anyone with variable or recently reduced income, the distinction is the most important one on the page.
Does ACC affect my income protection payments?
Usually, yes. Most income protection policies offset other income received while on claim, including ACC weekly compensation. That is not a defect. It is why the illness half of the cover is the half that does the work, since ACC does not respond to illness at all.
Are income protection premiums tax deductible?
It depends on how the benefit is taxed. Where the monthly benefit is treated as taxable income, the premium is generally deductible. Where a benefit is paid tax free, it is generally not. Which applies turns on the policy type and how it is set up, and it is worth confirming the treatment with your accountant before the policy is issued rather than after.
What happens if I can only return to work part time?
Well-written policies pay a partial benefit proportionate to the income you have lost, and continue to do so while you build back up. Poorly written ones stop the moment you do any work at all. This clause rarely features in a quote comparison and frequently decides how a claim ends.
Cover that often sits alongside this
- Mortgage protection the same idea narrowed to one obligation, and often the more affordable starting point.
- Total and permanent disablement cover the lump sum for when the situation turns out to be permanent.
- Trauma and critical illness cover pays on diagnosis, well before any wait period on this cover has run.
- Redundancy cover answers a different cause of the same problem: the income stops.
Talk to us about income protection
An initial consultation runs about an hour, in our Garden Place rooms in Hamilton. You sign one thing: confirmation that you have received our disclosure statement and understood it. Nothing else.
This page is general information about how this type of cover works. It is not financial advice for your circumstances. Advice is given after we understand your position. See our disclosure statement.