Group income protection insurance for employees

Most New Zealanders are one serious illness or injury away from losing their income, yet only 11% surveyed held any form of income protection.

Part of the reason is a gap many employees don't realise exists: ACC pays out for injury caused by an accident, but not for illness, so someone off work for months with cancer, a heart condition, or a serious mental health issue has no ACC support at all.

Sick leave doesn't stretch far enough to cover it either. It runs to 10 days a year, capping at 20 with unused days carried over. And once that's exhausted, income stops unless the employee still has annual leave to draw on.

Group income protection closes that gap. You take out one policy over your team, and it pays a monthly benefit to an employee who cannot work through illness or injury, once they've been off for an agreed waiting period. Most staff are accepted without health questions.

That’s where Policywise comes in: an independent New Zealand adviser. We compare group income protection across multiple insurers, set your scheme up, and manage claims for you and your staff.

What is group income protection insurance?

Group income protection insurance (salary replacement insurance for employees) is a policy an employer takes out over its workforce. Your business owns it and pays the premiums, and eligible employees are covered as members rather than individual policyholders. It pays a monthly benefit to a member who cannot work through illness or injury, after a set waiting period.

Your schedule sets who is eligible, the monthly benefit insured, and the waiting and benefit periods, and cover is generally compulsory for eligible employees, subject to the scheme's schedule.

Why offer your employees group income protection benefits

Group income protection covers the gap left by ACC and sick leave. ACC pays only where an accident caused the injury, not illness, and sick leave runs out after the statutory minimum of 10 days a year, though unused leave can carry over to a higher cap. Group cover steps in once that runs dry, replacing part of an employee's income through a long illness.

Advantages for your business

Group income protection lets you support staff through a long illness without your payroll absorbing the cost.

• The insurer carries the cost, not your payroll: Once a claim is accepted, the insurer funds the monthly benefit itself, so a long illness doesn't turn into an ongoing cost your business has to carry.
• Automatic acceptance for most staff: Employees within the scheme's automatic-acceptance limit are accepted without individual health underwriting, so you can offer real cover across your team without a health assessment for every person on the scheme.
• Premiums are generally tax-deductible: Premiums are generally deductible for the business, on the same basis as salary and wages. Fringe Benefit Tax normally applies to employer-arranged sickness and accident cover, but income protection insurance can be excluded from FBT where the employer carries the liability for the premiums and any resulting claim payment would count as assessable income to the employee. This exclusion is specific to income protection.

Advantages for your employees

For employees, group income protection covers the exact gap ACC leaves behind: illness, not just accident.

• Cover continues after sick leave runs out: Income continues once sick leave is exhausted, at up to 75% of pre-disability earnings, rather than stopping the moment paid leave does.
• No health questions: Most employees are accepted without the medical questions individual cover usually involves.
• Support to return to work, not just a payout: Cover typically comes with support to return to work, rather than a payment on its own.

Income protection isn't the only way to support staff through a serious health event, though. Group trauma cover works alongside it, paying a lump sum on diagnosis rather than an ongoing monthly benefit.

If you're weighing up which fits your team, trauma insurance vs income protection sets out how the two compare.

Features and benefits of group income protection policies

Group income protection policies typically bundle several core features. The two most central are a claim trigger based on inability to work, and income replacement of up to 75% of pre-disability earnings.

Most of the rest are built in rather than optional, with the details set on your scheme's schedule. What varies between insurers is the earnings definition, the caps, and which extras are automatic.

• What it covers, and what triggers a claim. There is no named-illness list. A claim starts when an employee cannot work through illness or injury and stays unable to work through the waiting period.
• Up to 75 per cent of pre-disability earnings, with the earnings definition and any dollar ceiling depending on your insurer.
• A waiting period and a benefit period, both set on your schedule.
• Proportionate payments on a part-time return, and recurrence cover, so a relapse soon after returning does not restart the waiting period, though the window for this is longer with some insurers than others.
• Rehabilitation and return-to-work support, built in as standard.
• Premium waiver while a member is on claim, and a death benefit on claim of three times the monthly benefit.
• Indexation during a long claim. Built in with some insurers, optional with others.
• Offsets. ACC is deducted from the benefit. With some insurers, sick leave and other income-replacement payments for the same incapacity are deducted too.
• Exclusions, typically self-inflicted injury and pregnancy and childbirth, though with some insurers cover continues if disability carries on past a set period.
• Some insurers offer optional restrictions for a lower premium, such as capping mental health and back claims.

How do you set up a group income protection scheme?

Setting up a scheme starts with a quote based on your employee data, then a schedule defining who is covered and on what terms. Insurers generally look for clear eligibility rules, all eligible employees covered rather than a selected few, and employer-paid premiums.

How many employees do you need?

Around 10 employees is the typical threshold for a group income protection scheme in New Zealand. With some insurers, that figure sets the minimum to establish a scheme at all; with others, it instead governs automatic acceptance and cancellation rights, with the setup figure itself coming from that insurer's own product materials rather than its policy document. Your insurer may agree to a different number.

Do employees have to answer health questions?

Usually not. Group schemes carry an automatic acceptance limit, and employees insured up to it are covered without medical questions or examinations. Health information is generally needed only in specific situations, which vary by insurer. Examples include where cover exceeds the automatic-acceptance limit, an employee previously declined cover, or automatic acceptance has been withdrawn.

Pre-existing conditions don't rule out cover altogether. Some insurers explicitly rule out a blanket pre-existing-conditions exclusion. Others simply don't treat pre-existing conditions as a named category, handling them instead through evidence-of-insurability.

Having one doesn't mean an employee can't get cover at all, or that the condition will be automatically excluded. Where someone is individually underwritten, an insurer may apply a loading or a restriction.

Can you add other types of employee cover?

Yes. Group income protection is commonly offered alongside other types of employee cover rather than on its own. Some insurers bundle company health cover, group life, group life and TPD, and group trauma cover within the same employee insurance policy; others issue a separate policy for each. Either way, you pick the mix that suits your team.

How claims work

A group income protection claim usually starts with the employer, who notifies the insurer as soon as possible, in writing with some insurers, within a set window (up to 30 days) with others. The form is often completed in parts by the business, the employee, and their doctor, depending on the insurer. Payment begins once the waiting period has been served.

Where the scheme is placed through Policywise, Policywise manages the claim and challenges a decision that looks wrong.

How much does group income protection cost?

Group income protection is priced per scheme, so there is no list price. Some insurers recalculate premiums at each renewal using factors such as your employees' ages, occupations, and incomes, and the cover level you choose, though exactly how depends on your insurer.

As a rough guide, Policywise's own estimate for group cover generally is under one per cent of insured payroll. Several factors typically shape the price:

• Workforce size: a change of around 30 per cent or more in insured lives may let an insurer review the automatic-acceptance limit or, depending on the insurer, the premium.
• Workforce profile: the age, sex, occupation, and income of your members, which some insurers recalculate at each annual renewal.
• Level of cover: the benefit percentage and any monthly cap.
• Restrictions: what employers accept with some insurers, such as capping mental health and back claims.

To receive a customised group income cover package and quote for your business, provide the following details of your employees:

• Name (optional)
• Date of birth
• Gender
• Salary
• Occupation

With just this basic information, Policywise can supply a free, no-obligation quote comparing group income protection options across insurers for your business and employees.

How Policywise supports you as your group income protection broker

The right broker can help you find the best value income protection cover for your business and employees. Policywise stands out as a trusted partner for businesses across New Zealand, offering expertise, personalised service, and a commitment to finding the best employee insurance solutions.

• Access to multiple insurers: Rather than limiting yourself to quotes from a single insurer, Policywise gives you access to a range of options from multiple insurers.
• You can compare different plans, benefits, and costs all in one place, ensuring the best possible cover at the most competitive price.
• Time-saving and hassle-free: Navigating the insurance market can be overwhelming. By working with Policywise, you’ll save time and avoid the hassle because we do the legwork for you, presenting a curated selection of options that meet your needs.
• Licenced and trusted: Policywise is fully licenced by the Financial Markets Authority (FMA), giving you peace of mind that you’re working with a reputable and trustworthy broker. Our transparent approach and commitment to ethical practices mean you can rely on us to act in your best interests.