Income Protection Insurance in NZ

Income protection insurance pays a monthly benefit if illness or injury stops you working. For most New Zealanders it's the most important policy to get right — your ability to earn is usually your largest financial asset.

How it works

You insure a percentage of your pre-tax income, typically up to 75%. After a wait period (often four, eight or thirteen weeks) the insurer pays a monthly benefit until you can return to work, or until the policy term ends — commonly age 65.

Agreed value vs indemnity

Agreed value policies lock in the benefit at the time you apply, regardless of what you earn at claim time. Indemnity policies pay based on your actual recent income. Agreed value costs more but matters most for self-employed or commission-based earners whose income fluctuates.

Wait period and benefit period

• Longer wait periods reduce the premium meaningfully.
• A wait period should be at least as long as your sick leave and emergency savings.
• A benefit period to age 65 protects against the genuinely life-changing claims.

How it interacts with ACC

ACC covers accidents but not most illnesses, which is exactly the gap income protection is built to fill. Some policies offset ACC payments; check whether yours does, and how that affects your real benefit.

Common policy traps

• Underinsuring relative to your actual take-home pay.
• Failing to disclose existing conditions — claims can be declined.
• Choosing a short benefit period to save premium, then claiming long-term.

Key takeaways

• Income protection fills the gap ACC doesn't cover.
• Match the wait period to your sick leave and savings.
• Agreed value suits the self-employed; indemnity suits salaried PAYE.
• A benefit period to age 65 is worth the extra premium for most.

Compare current life and income cover on MoneyGuru, and read our life insurance guide to make sure both policies sit at the right level.