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Income Protection Insurance New Zealand

Cash is King!

Even if you work full time as an accountant or a contracted electrician who’s weekly hours never are the same, the challenges are the same: if you are forced to stop working, who will pay the bills?

This is why Income Protection Insurance exists.

Income Protection Insurance keeps your lifestyle going by paying up to 75% of your income if you were unable to work due to injury, illness or disability.

When the unexpected happens, we know what matters is if you can manage your expenses (e.g. mortgage, rent, food, utilities) while you recover.

We work with the best income protection insurance providers in New Zealand.

It is simple to arrange and tailored to you and your circumstances.

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Income Disability Protetion Insurance NZ

How Income Protection Insurance in New Zealand works

The policy pays a monthly benefit for 2 or 5 years, or until age 65 or 70, to the person insured who is unable to work due to an illness, accident or disability after an agreed waiting period of between 2 – 104 weeks.

1. Cost of Income Protection Insurance NZ

Income protection insurance in New Zealand is the one insurance where you have a lot of control over the premium cost because the waiting period, benefit period and agreed value or indemnity value are all factors that you can select.

 – Your cost, without income protection insurance

The real question to consider, is how much are you worth?

Job A: earns $100,000 per year and if disabled has no income going forward.

Job B: earns $98,000 per year and if disabled earns $62,250 ongoing.

Which job would you prefer?

Which Job would you choose?

Now, look at the following chart and imagine your future income and earnings.

Do I need to ask if you consider your ability to earn an income significant enough to ensure your future earnings potential?

 – How much income could you lose?

Your ability to earn an income is your greatest asset.

Short term or long term disability can severely disrupt any budget, and if family and loved ones rely on your income, their lifestyle will also be affected.

But how much income could you lose? check out this chart.

How much income could you lose?

 – Specific Occupation Costs

Monthly premiums for Income Protection Insurance is calculated based on age, gender, risk, the cover amount, benefit payout duration and waiting period.

In the following scenarios, the estimated premiums are based on non-smoking male and female, both health and age 30.

wdt_ID Occupation $3,750 Monthly Benefit - Male age 30 $3,750 Monthly Benefit - Female age 30
10 Accountant 33.55 47.41
12 Electrician 56.82 80.40
15 Carpenter 56.82 80.40
16 Civil Engineer 33.55 47.41
17 Painter 75.61 106.94
18 Dentist 33.55 47.41
19 Customs Officer 38.28 56.65
20 Car Salesperson 42.44 60.03
21 Beekeeper 56.82 80.40
22 Psychiatric Nurse 75.61 106.94
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2. Why you need Income Protection Insurance

The chance of missing months or years of work because of an injury or illness may seem remote, especially if you’re young and healthy and you work at a desk.

But each year a staggering 54,800 New Zealanders are impacted by someone in their household being unable to work for three months or more due to illness.

To break it down.

That’s equal to 150 Kiwi’s every day, that are impacted by a disability. And the pressure of supporting the family financially, paying the mortgage or rent is on.

The actual claims are evidence that more and more Kiwi’s protect their future income.

And here’s the proof.

3. What affects the cost of Income Protection?

The premiums for Income Protection will depend on a variety of factors.

Age is significant and the younger you are, the lower the premiums are.

Your job and the risk related to your job will have an importance on how much you pay.

As late as last week a gentleman that works as a linesman purchased income protection.

His area of expertise compared to that of an office worker are two completely separate risk categories. Therefore the linesman premiums are higher than the office worker.

The same linesman was deferred income protection through a bank as it was considered too risky business for the bank.

However, the cost of an income protection policy will vary based on a number of factors, including:

  • age
  • job category ie. linesman vs office worker
  • whether you smoke or have smoked the last 12 months
  • the percentage of income you would like to cover
    • Agreed Value – max 62.5%
    • Indemnity Value – max 75.0%
  • the waiting period before the policy pays out
  • how long you want the benefit payout
  • health (your current health, your weight, your family medical history).

Why do women pay more for income protection?

Most New Zealand Income Protection Insurers do charge females higher income protection premiums than males, even if risk factors such as age and occupation are the same.

One of the reasons being women are more likely to claim than men, and once on a claim are more likely to remain off work for a longer period.

Income Disability Protection Insurance

4. Compare Income Protection Insurance NZ

We’ve partnered with New Zealand’s best Income Protection Insurance providers, with the strongest credit rating, that has the best built-in benefits and with optional benefits to customise the Income Protection coverage to your needs.

Some of the optional benefits include

wdt_ID Income Protection Insurer Credit Rating Maximum % of Income Covered Maximum Benefit Period Waiting Period WorldWide Cover
19 A+ (Very Strong)
Standard & Poor's
75% / $25,000 p/m 5 years or age 70 4, 8, 13, 26, 52 or 104 weeks ✔︎
20 AA- (Very Strong)
Standard & Poor's
75% / $25.000 p/m 5 years or age 70 4, 8, 13, 26, 52 or 104 weeks ✔︎
21 A- (Excellent)
A.M. Best
75% / $25,000 p/m 5 years or age 70 2, 4, 8, 13, 26, 52 or 104 weeks ✔︎
22 A+ (Superior)
A.M. Best
75% / $25,000 p/m 5 years or age 70 2, 4, 8, 13, 26, 52 or 104 weeks ✔︎

5. Income Protection Insurance Basics

Income protection insurance in New Zealand is an insurance policy that replaces some of your income if you’re unable to work due to serious illness or injury.

  • Most policies in New Zealand will provide you with a monthly payment up to 75% of your total income to keep your lifestyle going during recovery.
  • Your income can include any commissions, bonuses or fringe benefits that you are eligible to receive.
  • Policies can cover you 2 or 5 years or until 65 or 70.

 – Agreed Value vs Indemnity Value Income Protection

Agreed value and Indemnity Value are the two benefit structures that you can choose from when you apply for income protection:

  • Indemnity Value: Benefit payout based on income at the time of claim
  • Agreed Value: Benefit payout based on your income at the time of application

I can hear you thinking,

 – Is Agreed Value or Indemnity Value right for me?

By and large dependant on the nature of your income, if your income is stable or fluctuates.

wdt_ID Your Situation Policy Benefit Best For
19 Salary or Fixed Income Indemnity Value Verified income at time of claim
20 Wages or Fluctuating Income Agreed Value Covers an agreed amount when policy is issued.

 – What is Agreed Value Income Protection?

When applying for an agreed value income protection policy you will have to provide proof of income. Payslips that are not older than 3 months will do.

Your policy and the sum insured is then based on the value of your income agreed upon by you and your insurer.

 – Agreed Value Income Protection Pros and Cons


  Premiums are tax deductible

  Agreed benefit payout at time when policy is issued


Benefit Payout is taxable

  Slightly higher premiums than Indemnity Cover

What is Indemnity Value Income Protection?

You will have to provide financial documentation for your gross income when you make a claim.

And the benefit payout will be assessed based on your gross income.

Indemnity Value Income Protection Pros and Cons


  Suitable for long term career persons on salary

  Quick application process since no proof of income is required

  Lower premiums


Benefit Payout is tax payable

 Your benefit is calculated on your income at the time you make a claim

 – Compare Income Protection Insurance Policies

Use the table below to compare Income Protection Insurance policies to find out which one is best for you.

wdt_ID Feature Loss of Earnings Loss of Earnings Plus Mortgage and Living Cover
1 Worldwide 24/7 Cover ✔︎ ✔︎ ✔︎
2 Your Benefit Amount Up to 75% of your pre-tax monthly salary Up to 75% of income or 115% of Mortgage/Rent - max $7,500 per month
3 Waiting Period 2 Weeks - 104 Weeks 2 Weeks - 104 Weeks 2 Weeks - 104 Weeks
4 Benefit Period 2 or 5 years, or to age 65 or 70 2 or 5 years, or to age 65 or 70 2 or 5 years, or to age 65 or 70
5 Transition to Level Premiums ✔︎ - no further underwriting ✔︎ - no further underwriting ✔︎ - no further underwriting
6 Tax Deductible Premiums ✔︎
7 Redundancy Cover Option ✔︎ ✔︎ ✔︎
8 ACC Offsets ✔︎
9 Homemaker support benefit ✔︎
10 Rehabilitation and Retraining Support. ✔︎ ✔︎ ✔︎

6. Do you need Income Protection Insurance?

Your most valuable asset is your ability to make a living, your ability to work and earn an income.

If you are disabled, income protection insurance is designed to replace a part of your income.

Recent research finds that more than 1,000 families a week – 54,800 a year, experience a sickness that prevents the primary income earner from working for three months or more.

Such a long away from work could result in a redundancy?

Mental illness can also be disabling, and with income protection insurance in place, the insurer will work with the individual and offer rehabilitation and retraining support.

Maybe a career change would help you get back to work. Because after all, your greatest asset is your ability to earn an income.

Getting help from an HR adviser would help clarify that.

Income Protection Insurance covers 1 in 4 Kiwis.

By comparison, around 4 in 5 Kiwi’s have their vehicles insured.

An income of $60,000 a year for 30 years comes to $1,8 million, much more than the value of most homes.

7. Frequently Asked Income Protection Insurance Questions

Should I choose a shorter or longer waiting period?

You can save on your Income Protection Insurance premiums by extending your waiting period. You need to consider if you can finance the waiting period yourself possibly without an income from your employer. Perhaps you have enough savings and sick leave up the sleeve during the waiting period.

Is Income Protection Premiums tax deductible?

In short the answer is yes.

And no.

As long as any claim will result in a benefit pay out and is treated as a taxable income, then the income protection insurance premiums are tax deductable.

On the other hand, if the benefit is not tax deductable, then the income protection insurance premiums are not tax deductable.

As your broker, we will provide the necessary breakdown of premiums each financial year detailing the amount you’ve paid on your premiums and the portion that is tax deductible. Your accountant will love you for it.

How is the process like?

The big questions to consider, when looking into Income Protection Insurance:

Do I need Income Protection?

Your greatest asset is your ability to earn an income. Once we get established in life, buy our first home, get a family, our circumstances change completely.

Fixed costs and expenses increase, and to stay on top of things, we need to bring home a consistent income to stay on top of everything.

But would happen if you couldn’t work, due to serious illness or injury?

The comfort of knowing you have income protection means your income will be replaced up to 75% of your income each month for a pre-set period.

How is the application process?

Your premiums vary depending on how risky you are to insure.

At LifeCovered we only work with Insurance Companies that do all the underwriting upfront. The underwriting process is probably the most important part of the whole buying experience because it will determine the offer you receive. And ultimately how you and your family are financially covered.

The application process is generally completed over the phone.

Your adviser will ask a series of questions, which range from your personal details, occupation, income and through to personal and family medical history.

Your application will then be lodged with our insurers; it will then be assessed and underwritten.

An electronic copy of the application will be sent to you as well.

How can I get redundancy cover?

Many wrongly believe that income protection insurance provides cover for involuntary redundancy.

But unfortunately, it’s not that simple.

Income protection is designed to provide you with up to 75% of your wage for a fixed period of time, after a waiting period, if you are unable to work due to illness or injury. Redundancy insurance is not automatically included. However, there are options to included Redundancy insurance to your income protection insurance.

Income Protection Insurance for Doctors, Nurses, and Medical Professionals

8. Income Protection Insurance for Doctors, Nurses, and Medical Professionals

Working as a doctor, nurse, a surgeon or ambulance officer can mean working in a hazardous environment and can carry risks including:

  • Exposure to illnesses and diseases: Incidents like needle stick injuries are common for medical professionals, even with all the necessary safety and hygiene precautions.
  • Mental illnesses: Data shows that medical professionals are prone to developing medical illnesses.
  • Losing a high income if anything happens to you: Some medical profession are high paying, but this also leaves your family and yourself at risk if you are unable to work due to injury or illness.
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Income Protection for Company Directors, Managers, and Executives

9. Income Protection for Company Directors, Managers, and Executives

Company Directors, Managers, and Executives face little risk of accidents or physical injury (ACC Cover) but there are other risks to consider.

Anxiety, burnout, stress, depression, and liability is a worry for many Company Managers and Directors due to the pressure and risk of their job.

  • Anxiety, Burnout, Stress, and Depression: Managers and executives are often prone to anxiety and stress from the pressures of their work.
  • Liability: Managers and executives can be liable when things go wrong. And there are various forms of professional liability insurances for company managers and directors including professional indemnity insurance.

Income Protection NZ Self-Employed Tradesman

10. Income Protection for Self-Employed & Income-Splitting

If you’re a tradesperson, there are a few things you need to consider before getting Income Protection insurance.

Many self-employed tradies such as carpenters, plumbers or electricians operate their business with their spouse.

And income-splitting means fewer taxes paid. Income-splitting also means ACC benefits get split.

With the right Income Protection Insurance, you can keep your lifestyle going, even when things go wrong.

Other insurances for self-employed Professional Indemnity Insurance, Public Liability Insurance.

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Income Protection Insurance

Income Protection Insurance, ACC & WINZ

Accident Compensation Corporation shortened ACC compensates as the name implies for accident-related incidents.

ACC state on their website that:

“ACC pays up to 80% of your income as weekly compensation if you’re unable to work because of an injury ACC is covering. This means you’ll still get paid while you recover.”

Two details catch my attention.

Firstly unable to work because of injury and second injury that ACC is covering.


While ACC provides cover for specific injuries, ACC does not offer a blanket cover-all solution.

Here is an example of the physical injuries ACC cover. Get the complete overview here.

A physical injury is when there is actual damage to your body. This includes:

  • sprains or strains – such as ankle, back, knee or shoulder sprains
  • wounds – cut, broken or bruised skin
  • burns
  • fractures
  • dislocations
  • dental injuries
  • hearing loss
  • loss of consciousness.
Thankfully there is more to Income Protection Insurance than ACC.
Here’s a recent headline from New Zealand Herald.
More to Income Protection than ACC

Government benefits are unlikely to cover your living and lifestyle expenses.

You can only claim from ACC if you suffer an accident.

WINZ, Supported Living Payment net weekly benefit to a single person is $269.15.

Supported Living Payment is for people who are not able to work because they are:

  • restricted in their capacity for work because of a health condition, injury, or disability or totally blind or
  • caring for a person who requires full-time care and attention at home
Clearly the Supported Living Payment benefit is to help with bare minimums.
Here another headline from
ACC causing unacceptable harm - headline from NZ Herald
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There are lots of benefits to being covered by income protection.

Firstly, the satisfaction that your financial situation is more secure. That you are guaranteed a paycheck if you cannot work.

Secondly, there are more definite benefits for you to consider, dependent on policy and add-on options you choose.

  • Recurrent Disability: Your benefit will continue straight away if you’re affected by the same disability within 12 months of being back at work – waiving your waiting period.
  • Disability Reset: Following a claim on Your Income Protection Insurance Policy that has either 2 or 5-year benefit, the benefit period will be reset. This allows you to claim for a new or related illness if the need arises.
  • Accommodation: Pays for your family to be with you if they live more than 100km away.

There are many banks and insurance companies that offer Income Protection Insurance.

The ones that stand out in the crowd offer a seamless transition to fixed premiums and pay your premiums while you are on claim.

And finally, the premiums you pay can be claimed on your annual income tax return.

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