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Insurance

Income protection insurance

Income protection insurance in New Zealand replaces up to 75 per cent of your earnings if illness or injury stops you from working.

For most people still earning, income is the single asset underwriting everything else. The right policy keeps your household running while you recover.

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Your total financial picture

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Your Income Is Your Most Valuable Asset

New Zealand is one of the most underinsured countries in the developed world when it comes to income protection. Research from the Financial Services Council found most New Zealanders have not seriously considered the risk of lost income due to illness or serious injury.

For most people, being out of work for even a few months triggers a cascade: mortgage arrears, depleted savings, delayed retirement, reduced quality of life for the whole family. Income protection exists to prevent exactly this.

The cover pays a regular monthly benefit for a defined period. It is not a lump sum like life insurance or trauma cover. It replaces the income stream your household depends on.

The Tax Advantage Most People Miss

Income protection premiums are generally tax-deductible for individuals in New Zealand. Under current IRD guidance, premiums paid directly by you can be claimed as an expense, reducing your taxable income each year.

The deductibility applies because benefit payments, if you ever claim, are treated as taxable income. You deduct the premiums going in; you pay tax on the benefit coming out. Confirm the position with your accountant, as the rules depend on policy structure and who pays the premium.

ACC Does Not Cover Illness

ACC covers treatment and income replacement arising from accidents. It does not cover illness. A cancer diagnosis, a degenerative spinal condition, chronic fatigue, or a mental health crisis all fall outside ACC’s scope entirely.

ACC’s income replacement is also capped. If you earn above the weekly maximum, the shortfall can be significant. Payments cease when you are able to return to work in some capacity, even if you cannot return to your previous role.

Government assistance beyond ACC is limited. The disability allowance available through Work and Income is not designed to maintain a household’s standard of living.

Health insurance pays the hospital. Income protection pays your mortgage and living costs while you recover. Most people need both. For a detailed comparison, see our guide on ACC versus income protection.

What Income Protection Actually Pays

Benefit amount. Most policies pay up to 75 per cent of your pre-incapacity income. The cap ensures a financial incentive to return to work.

Waiting period. Options range from 14 days to two years. A 90-day wait often represents the best balance of cost and protection if you have savings or sick leave to bridge the gap.

Benefit period. Options include one year, two years, five years, or through to age 65 or 70. Longer means higher premiums but more comprehensive protection.

Payment frequency. Benefits are paid monthly, in contrast to the one-time lump sum from life or trauma cover.

How the benefit is calculated. For salaried employees, the calculation is usually straightforward. For business owners with fluctuating profits, how the insurer calculates your income at claim time matters as much as the percentage. Getting this agreed upfront avoids a shortfall when you need the money most.

Could your household manage three months without your income?

A complimentary review confirms whether your cover reflects your actual earnings.

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‍Income Protection for the Self-Employed

No employer-funded sick leave. No automatic ACC top-up. If you stop working, your income stops with you. Self-employed New Zealanders face a sharper version of the same risk.

Insurers assess self-employed applicants differently. Occupation, industry, and claims history all influence pricing. The trickiest part is establishing the insured income amount. Many business owners run personal expenses through their business, reducing taxable income on paper. If the insured amount is based on tax returns alone, it may fall short at claim time.

Getting this number right at the outset, with your adviser and accountant aligned, avoids a painful surprise later.

‍How a Become Wealth Adviser Helps

Our advisers are salaried, with no commission-based incentive to favour one insurer over another. We compare policies across the New Zealand market, looking at benefit levels, waiting periods, exclusions, premium sustainability, and claims track records. Where you already hold cover, we review it first.

Claims advocacy. If you need to claim, your adviser handles the paperwork, follows up with the insurer, and ensures your entitlements are met. Income protection claims require extensive documentation. Navigating this while unwell is precisely what most people want to avoid. Because Become Wealth is not owned by a bank or product provider, your income cover sits within your broader financial plan alongside your investments, lending, and other insurance.

‍Already Have Cover? Check for Gaps

Duplicate policies. Two income protection policies covering 75 per cent each will not pay out 150 per cent. The second is wasted premium. This is the most frequent issue our advisers find.

Benefit lagging income growth. If your earnings have increased since you took out the policy, your cover may fall short of the 75 per cent you expect.

Waiting period misaligned with savings. A 14-day wait costs considerably more than 90 days. If you have built an emergency fund, a longer wait can reduce premiums without reducing protection.

Important: if you are considering cancelling any insurance policy, proceed with caution. Cancellation is usually permanent and you will need full underwriting again.

Paying for two income protection policies?

A quick review confirms whether your cover is working as hard as your premiums.

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‍How It Works

Our advice process follows a structured six-step framework designed to make sure nothing is missed and every recommendation is peer-reviewed before it reaches you. Start with a relaxed initial conversation, completely at your pace.

FAQ: Income Protection Insurance in NZ

How much does income protection insurance cost?

Premiums vary by age, occupation, health, benefit period, and waiting period. We compare across providers to find cover appropriate to your situation and budget.

What is the difference between income protection and ACC?

ACC covers income loss from accidents. Income protection covers income loss from illness and injury. A cancer diagnosis, stroke, or mental health condition falls outside ACC.

Can I claim income protection premiums as a tax deduction?

Generally, yes. Premiums paid by an individual are typically tax-deductible. Benefit payments are then treated as taxable income. Confirm with your accountant.

Do I need income protection if I’m self-employed?

Self-employed people are often more exposed because they have no employer-funded sick leave. The insured amount needs to reflect actual earnings, not just taxable income.

What happens when I need to make a claim?

Your adviser acts as your advocate. We prepare the documentation, lodge the claim, and follow up with the insurer on your behalf.

Is there a cost for income insurance advice?

In most cases, no. The insurer pays an advice fee when a policy is placed. Our advisers are salaried. We confirm this in writing.

Why Become Wealth?

We're trusted to advise New Zealanders on investments totalling over $1 billion. You can trust us, too.

We look at insurance through a wealth lens. Your cover is assessed alongside your investments, lending, and goals, not in isolation.

Become Wealth is one of only 48 firms in New Zealand licensed to make investment decisions on behalf of clients (a Discretionary Investment Management Service). This requires us to meet a higher standard of regulatory oversight than most advisory firms. We are also a licensed Financial Advice Provider. FSP249805.