Compare Income Protection Insurance

What is income protection insurance?

Income protection insurance (also called salary protection or loss of income cover) provides a monthly payment if you are unable to work due to a long-term injury or illness. Income insurance can support you long after your sick leave entitlement runs out.

You can use this monthly cash benefit for anything you or your family needs to support your recovery and keep up with financial commitments. You can use it for:

• Rehabilitation or therapy 
• Medications including non-PHARMAC funded drugs
• Diagnostic tests and consultations at private healthcare facilities
• Mobility devices and modifications to make living with a disability in your home easier
• Groceries, utility bills, and other living expenses
• Mortgage or rent payments
• Payments for car loans, credit card bills, and other financial obligations

Do I need salary protection insurance?

Without protection from life’s uncertainties, a health crisis or injury can easily wipe out your hard-earned savings and assets. You insure your home or car in case of accidents or major damages, don’t you? It’s even more important to protect your most valuable asset: your health and ability to earn an income.

• Around 54,800 Kiwi families experience having their main income earner stop working for three months or longer due to an illness. (Horizon Research survey)
• One in three Kiwis don’t have enough funds for an unexpected $500 bill. (Kiwibank survey)
• ACC (Accident Compensation Corporation) only covers you if you’re hurt in an accident. ACC won’t cover you if sickness prevents you from going back to work. If you are self-employed or a contractor, ACC may also be confusing and costly to access, which could see you missing out or not getting the level of cover you need.

If you’re not sure whether you need income loss insurance, just ask yourself:

• Do you have enough sick leave to cover your mortgage, debts, living expenses, and other financial obligations if you can’t work for several months or years due to an injury or illness?
• How long will your savings, sickness benefit, and other income support you and your family?

If you don’t have sufficient resources to fall back on, getting income protection is a smart financial decision.

How does income protection insurance work?

Income protection insurance provides you with a financial cushion by insuring up to 75% of your income.

The monthly benefit you will receive will be reduced (offset) by other benefits you may be getting or entitled to for the same illness or injury. This may include:

• ACC compensation
• Sick leave payments
• Benefits from other insurance policies you may have such as mortgage protection insurance

You will start receiving benefits after the waiting period you chose when you applied for income insurance. For example, if you choose a waiting period of eight weeks, your benefits will start if you are still unable to work two months after you filed a claim.

You will receive monthly payments for the duration of the benefit period you selected when you got the policy. For example, if you chose a 5-year benefit period, you will continue to receive monthly payments for five years if you remain disabled and unable to work during this period.

Who can buy income protection insurance?

You can apply for income protection if:

• you’re 16 to 55–60 years of age (the maximum entry age varies across insurers)
• you’re employed (either full-time or part-time) or self-employed, and
• you’re a New Zealand citizen, a permanent resident, or have a long-term business visa or a work permit in the country.

Insurers may have other eligibility requirements. Talk to a Policywise adviser to learn more about each insurer’s criteria.

Choosing a waiting period

The waiting period refers to the time you’ll have to wait before your monthly income protection payout starts.

Choose the waiting period that suits your needs–it can be 2, 4, 8, 13, 26, 52, or 104 weeks. 

When choosing a waiting period, consider:

• how long your emergency fund will last if you are unable to work
• other income sources or savings you can rely on if you have to stop working
• how much paid sick leave your company owes you.

For example, if you have 2 weeks sick leave and your emergency fund can cover you for 6 weeks, you might opt for an 8-week waiting period.

TIP: Selecting a longer waiting period can make your premiums more affordable.

Choosing a benefit period

The benefit/payment period is the maximum length of time you can receive monthly benefits provided that you continue to meet the claim criteria. This can be for a year, 2, years, 5 years, or until retirement (age 65 or 70). 

You will stop receiving income benefits when the earliest of the following occurs: 

• you are no longer disabled and can go back to work
• your benefit period ends
• your cover ends
• you pass away

Choosing a shorter benefit period lowers your premium, but this also means that your payouts will stop sooner even if you’re still unable to work. If you choose until age 65 as your benefit period, and you suffer a permanent disability and can no longer work, you will continue to receive monthly payouts until you reach retirement age.

How much monthly benefit will I receive if I need to claim?

You can get up to 75% of your gross pre-disability income, less any benefits you’re receiving or are entitled to for the same illness or injury. For example, if your annual salary is $60,000 (or $5,000 per month), and you’re not receiving benefits from other sources, you can get up to $3,750 per month.

The exact monthly benefit you’ll get depends on:

• the type of cover you chose: agreed value (based on your income when you applied for cover) or indemnity value (based on your income at claim time)
• whether you are receiving benefits from other sources (also called benefit offsets) due to the same illness or injury. Benefit offsets may include sick pay from your employer, ACC entitlements, or other insurance policies you may have.
• how much of your income you have insured: You can opt to insure less than 75% of your income, depending on your circumstances and ability to pay the premium.

What's covered? Built-in and optional benefits of income insurance

Income insurance offers additional benefits that can ease the significant physical and financial challenges that come with a major sickness or injury.

Below are some built-in and optional benefits many insurers offer. Please check your policy document for the full list of benefits.

Does income protection insurance cover redundancy?

Redundancy cover isn’t a standard benefit in insurance protection policies, but some insurers offer it as an add-on. This optional benefit provides a monthly payout for several months if you are made redundant.

Other insurers give you the option to suspend your cover if you are made redundant. Note that you will not be able to make claims for injuries or illnesses during the suspension period.

How much do income protection premiums cost?

Your income protection premium depends on multiple factors such as your:

• Age & gender
• Health & smoking status
• Occupation & annual income
• Percentage of income you’d like to insure
• Waiting period & payment period
• Whether you choose level term (you pay a fixed premium) or age-rated payments (your premiums increase as you age).

Below are sample quotes from New Zealand’s best income protection insurers. Contact us to get a personalised quote comparison.

Why compare income protection plans and quotes before buying

Comparing income protection insurance products from multiple insurers allows you to choose the best product for your circumstances at the best price.

But comparing and reviewing income protection cover details can be overwhelming.

At Policywise, we make comparing income protection insurance quotes simple and easier for you, and it’s free! 

Why choose Policywise as your income protection insurance adviser

Policywise offers you:

• Comprehensive, impartial, and fast income protection quote comparisons: We include quotes from multiple insurance companies so you can choose the best product at the lowest price.
• Personalised recommendations that fit your needs and budget: Policywise advisers help you weigh up the pros and cons of each product as they relate to your situation. They explain technical terms and help you understand what’s covered and what’s not so you can make an informed decision before buying a policy.
• Free insurance advice: Policywise advisers can help you work out how much insurance you truly need. They’ll also review your existing cover and help you enhance your financial plan with the best insurance products.

And if you need to make a claim, Policywise will go into bat for you. Dealing directly with the insurance company can be challenging and stressful and you may not get the result you were hoping for. We can make the whole process much smoother.