Income protection waiting period: What it is and how to choose

What is an income protection waiting period, and how does it work?

An income protection waiting period (also referred to as a stand-down or deferred period) is the length of time you need to wait before you can start receiving your monthly benefits after an illness or injury keeps you from working. You choose waiting periods when you purchase your policy.

Here's an example: Let’s say your policy has a waiting period of 13 weeks. You are unable to work after a serious injury left you totally disabled, and you file an income protection claim. If you are still unable to work after 13 weeks, you will receive a monthly benefit.

If you recover and return to work before the 13-week waiting period ends, you won't receive any benefits since your income has been restored.

Note that income protection doesn’t just protect your income in case of a total disability. Several insurers provide monthly benefits if, after the waiting period, you remain partially disabled and have a significantly reduced earning capacity. 

How long is the stand-down period for income protection?

Waiting period options vary across insurers. The shortest waiting period is typically two weeks, while the longest extends to 104 weeks (two years). Other options are 4, 8, 13, 26, and 52 weeks.

Because different income insurance plans have different waiting periods and benefits, it's important to research your options. A Policywise adviser can help you compare income protection plans and quotes to find the best fit for your needs.

Factors to consider when choosing an income insurance waiting period

When choosing your waiting period, consider how long you can manage without a regular income. Consider the following factors: 

• Whether you have sufficient savings or an emergency fund to draw on
• Whether you have leave entitlements from work, which you can use in case of a long-term illness or injury
• Other insurance plans, such as mortgage protection cover, that could provide benefits if you can't work due to illness or injury.

Choosing a short waiting period means you will receive your benefits sooner. You can then preserve your emergency fund or use your savings for other important expenses. 

But this option comes with higher premiums. Also, if you’re still receiving other benefits for the same condition (such as sick leave payments), these will reduce your monthly benefit. 

A longer waiting period means lower premiums, but you'll need to wait longer to receive your benefit. If you prefer this option, ensure you have enough financial resources or other benefits to cover your household’s expenses during the stand-down period.

What’s the difference between a waiting period and a benefit period?

The income protection waiting period is the time you must wait before receiving benefits after you’ve made a claim. In contrast, the benefit period or payment period is the length of time you will receive benefits once the waiting period is over.

Benefit period options vary across plans and insurers and can range from a few months to several years or until you reach retirement age (65 or 70).

You will continue to receive your monthly income benefit until the earliest of the following happens: you are no longer disabled and can return to work, you pass away, your benefit period ends, or your cover ends.

Keep in mind that the benefit period also impacts your premium cost. Generally, the longer the benefit period, the higher the premium. Try to balance your need for long-term financial support with the cost of your premiums.

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Let Policywise help you find an income cover that fits your needs

Going directly to insurers might seem straightforward, but may not offer you the best solution for your specific needs. 

Working with a specialised insurance broker, like Policywise, offers clarity and assurance, saving you time and effort in finding the best income protection plan. You benefit from our independent research and expertise in comparing plans, and our recommendations are personalised to you. 

Policywise is a 100% free service which tells you which health, life, and disability insurance provider best fits your needs. We offer fast, comprehensive, and easy-to-understand comparisons of all leading providers and a simple summary clearly recommending which insurer is best for your situation.

Not all insurance policies are the same. Policywise can help you sort out the duds, avoid the lemons, understand the fine print and exclusions, and get the right insurance for you and your family.

We make the important decision of where to buy your insurance super easy. We’ll answer your questions, provide experienced advice and quotes, and manage all the back and forth throughout the application process. Taking out your cover through us means you'll have our lifetime support and claims advocacy, and we'll help you negotiate a positive outcome at claim time. We can also take care of lodging any claims on your behalf and back you up if the going gets tough.

Check out the reviews on our homepage for how other New Zealanders have found our service, because now is the time to get your income protection cover sorted. Give your family or someone you love the most outstanding financial support possible. Book a 5-minute callback with Policywise today; our service is fast and free.