Life can be unpredictable, and for many New Zealanders, protecting their income is just as important as insuring their home or car. Income protection cover provides financial support if you’re unable to work due to illness or injury – but it’s a policy that often raises a lot of questions. If you’re wondering whether it’s right for you, here are the top 10 questions Kiwis ask about income protection cover.

1. What is income protection insurance, and how does it work?
Income protection insurance provides you with a portion of your usual income if you’re unable to work due to illness or injury. Most policies cover up to 75% of your pre-tax earnings for a set period, helping you pay your bills while you recover. Payments usually begin after a waiting period, which can range from two weeks to several years.
2. Do I really need income protection if I have ACC?
ACC covers injuries, but it doesn’t cover non-accident-related illnesses that prevent you from working. If you develop a serious illness like cancer or heart disease, ACC won’t help – but income protection insurance will. This makes income cover essential for those who want a financial safety net beyond accident-related injuries.
More information: ACC - What We Cover
3. How much does income protection insurance cost in NZ?
Premiums vary depending on factors like your age, occupation, income, and chosen waiting period. Generally, high-risk jobs (such as trades or manual labour) attract higher premiums than low-risk office jobs. A longer waiting period can lower your premiums, while a shorter waiting period increases them.
Speak with an adviser who can help you decide how to structure the policy to suit your needs and budget.
4. What’s the difference between an agreed value and an indemnity policy?
There are two main types of income protection policies:
Agreed value: Your benefit is based on a pre-determined income amount, regardless of your actual earnings at the time of claim.
Indemnity value: Your benefit is calculated based on your earnings at the time of your claim, which can fluctuate if you’re self-employed or working on commission.
There are advantages and disadvantages to both options depending on your circumstances. Most providers who offer income protection covers also offer a combined type policy where you are assessed by the most advantageous method to you at claim time.
5. How long do income protection payments last?
You can choose from different benefit periods, typically ranging from two years to up to retirement age. A longer benefit period provides more security but comes with higher premiums. It’s important to strike the right balance between affordability and long-term financial protection.
6. Can I get income protection if I’m self-employed?
Yes, self-employed Kiwis can get income protection cover. Since you don’t have employer sick leave entitlements, this type of insurance can provide crucial financial support if illness or injury stops you from working.
It's also important to consider how ACC fits into your financial plan. If you are self-employed, you can actually set your ACC rate to what suits you, and combine this with the correct income protection for optimal cover for both accidents and sicknesses.
7. Is income protection insurance tax-deductible?
For most employed Kiwis, income protection premiums are not tax-deductible. However, if you’re self-employed and your policy is structured correctly, you may be able to claim it as a business expense. It’s always best to check with a tax adviser or an accountant to ensure compliance.
8. How does income protection compare to trauma or TPD cover?
Income protection: Pays a monthly benefit if you’re unable to work due to illness or injury.
Trauma cover: Provides a lump sum payment if you’re diagnosed with a serious illness like cancer or stroke.
Total and Permanent Disability (TPD) cover: Pays a lump sum if you’re permanently unable to work due to disability.
Each policy serves a different purpose, and some Kiwis choose to have a combination of these covers for comprehensive protection.
In my experience as an adviser, new clients sometimes ask for just whichever cover is cheaper. It's a little more complex than that; they all quite different types of cover.
More information: Personal Insurance - Learn More
9. Will my income protection cover mental health conditions?
Many policies do cover mental health conditions like anxiety and depression if they prevent you from working. However, some insurers may impose exclusions or require a mental health history assessment before offering cover. If mental health cover is important to you, be sure to read the fine print.
Some providers also allow you to self-exclude mental health conditions from the cover, making the premium cheaper.
10. How do I choose the right income protection policy?
Finding the right policy involves assessing factors like:
Your current income and expenses
Whether you have savings or other financial support, such as a partner's income
Your job type and risk level
The waiting period and benefit period that best suits you
It’s worth seeking advice to ensure you’re making the best choice for your situation.
Ready to explore your options? Start by getting a personalised quote.
The information in this article is general information only and is not intended as financial, medical, health, nutritional, tax or other advice. It does not take into account any individual’s personal situation or needs. You should consider obtaining professional advice from a financial adviser and/or tax specialist, or medical or health practitioner, in relation to your own circumstances and before acting on this information.
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