NZ Income Protection Insurance Calculator

How Income Protection Works in NZ

Income protection insurance pays you a regular monthly benefit if you cannot work due to illness or injury. It is designed as long-term income replacement, complementing short-term sick leave and ACC (which covers accident-related injury only).

Benefit Amount

NZ income protection typically caps benefits at 75% of your pre-tax income. Some insurers use tiered caps: 62.5% for income up to $70,000, 60% for $70,000 to $100,000, and 55% for income over $100,000. The rationale is that receiving too close to 100% of your income removes the financial incentive to return to work.

Maximum monthly benefit amounts vary by insurer, typically from $15,000 to $30,000 per month. Agreed value policies lock the benefit at application time; indemnity policies base the benefit on your actual income at claim time.

Waiting Period (Stand-Down)

The waiting period is how long you must be unable to work before benefits start. NZ insurers typically offer 2, 4, 8, 13, 26, 52, or 104 weeks. Longer waiting periods mean significantly lower premiums.

Benefit Period

The benefit period is how long payments continue once they start. Options range from 1 year to age 65 or 70. A "to age 65" benefit period provides full career-length protection but costs significantly more than a 2 or 5 year period.

For most people with long working lives ahead, a "to age 65" benefit period is worth the extra premium: a serious illness in your 40s could end your career, and a 2-year benefit would leave you with decades of no income. Younger workers with shorter time horizons may consider 5 year periods as a cost balance.

ACC vs Income Protection

Cover Types

Agreed Value

Your benefit amount is locked in at policy inception, based on income at that time. If your income drops before you claim, you still receive the agreed amount. Premiums are around 15% higher than indemnity. Agreed value is becoming less common: some NZ insurers no longer offer it for new policies due to anti-selection concerns and regulatory changes.

Indemnity

Benefit is calculated at claim time based on your actual income in the 12 months before disability. If your income dropped before the claim, your benefit reflects that lower income. Cheaper premiums but less certainty for variable-income earners.

Loss of Earnings

Benefit is calculated as the difference between pre-disability and post-disability income. Works well for partial disability claims where you can return to lower-paid or part-time work.

Tax Treatment

Income protection has an unusual tax structure: premiums are generally tax-deductible (if the benefit would be taxable), and benefits are treated as taxable income at your marginal rate. The practical effect is roughly neutral for most taxpayers.

For self-employed people and business owners, premiums paid through the business are deductible. For employees, the deductibility rules depend on whether the policy is held personally or by the employer. Always confirm your specific situation with your accountant.

Typical Premium Discounts and Offsets

• Multi-policy discount: Up to 15% if you bundle income protection with life or trauma cover.
• AIA Vitality / wellness programs: Some insurers offer up to 20% discount for healthy lifestyle metrics.
• Offsets at claim time: ACC payments, employer sick pay, and Work and Income benefits are typically offset against your insurance benefit.
• Annual vs monthly billing: Most insurers charge a small premium for monthly payments (typically 3 to 5%).

When to Review

Review your income protection cover when any of the following happens:

• Significant pay rise (for indemnity cover: may need to increase benefit; for agreed value: benefit is already locked)
• Becoming self-employed (often need to increase cover as employer sick leave is no longer available)
• Change in health (opportunity to request non-smoker rates or remove loadings)
• Change in occupation (may affect premium class and availability)
• Building emergency savings (may allow extending waiting period to save premium)

Common Exclusions

Standard policy exclusions typically include: self-inflicted injury, war, criminal activity, drugs or alcohol-related claims, pregnancy or childbirth complications (unless extending beyond 90 days), and pre-existing conditions disclosed at application.

Mental health conditions are covered by most modern NZ policies but may have specific waiting period requirements. Some insurers exclude certain mental health diagnoses or apply specific benefit period limits for mental health claims.

Sources: AIA NZ, Partners Life, Chubb Life (Assurance Extra), Fidelity Life, MAS Income Security, OneChoice, Policywise NZ, and IRD guidance on premium deductibility. Premium data based on NZ market research as at April 2026.

This calculator provides indicative estimates only and does not constitute financial or insurance advice. Actual income protection premiums depend on your full medical history, occupation, hobbies, and insurer underwriting. Always obtain personalised quotes from multiple insurers or through a qualified insurance adviser before purchasing cover.