Redundancy Insurance in NZ: What Exists, What It Pays and Who Cannot Get It
Nobody sells redundancy insurance on its own in New Zealand. It exists as an optional benefit on income protection or mortgage cover, pays a capped monthly amount for up to six months, and both published wordings exclude a redundancy you knew or should have known about when the cover started. This guide is what the wordings say, so you know what a policy will do in this restructure.
What is actually sold
Nobody in New Zealand sells redundancy insurance on its own. What exists is an optional benefit that attaches to another policy. AIA's Living Personal Redundancy Benefit applies only if you hold a current AIA Living Mortgage or Income Protection Benefit. Chubb's Assurance Extra Redundancy Cover can only be chosen with Income Cover or Mortgage Repayment Cover. Some mortgage repayment policies arranged through lenders include a redundancy component for a few months of repayments; if you have one, the policy document says so, and the document is the only place to check.
The reason is in how the risk behaves. Illness and injury strike people one at a time; redundancy arrives in waves, and a wave of claims in the same quarter is exactly what an insurer cannot price. So the products are small, capped and hedged with exclusions, and they are not designed to replace a salary. Chubb's cover is limited to the combined sums insured of the income and mortgage cover you hold with it, up to a maximum of $4,000 a month, and its entry age runs from 16 to 55.
This guide quotes two published wordings because they are the two that can be read in full. It does not recommend either, or any product. What it shows is the shape of the cover, so that anyone holding a policy with a redundancy benefit knows what it will and will not do in a restructure, and anyone thinking of buying one after the proposal has landed knows why that will not work.
Policy wordings change, and the two quoted here carry their own dates. Your policy is the one that matters, and a financial adviser can read it against your situation. Nothing here is a recommendation to buy, keep or cancel any cover.
What it pays, and for how long
Both wordings pay a monthly amount for a limited time. AIA pays the redundancy sum assured shown in the schedule, less any other mortgage or income protection benefits you receive in connection with the same redundancy, though a Work and Income benefit is not deducted. It is paid monthly in arrears, with the first payment one month after the end of the waiting period, and it stops at the earliest of six months after the benefit commenced, the day you start working again as a casual, part-time or full-time employee, a contractor or self-employed, your 65th birthday, or death. Chubb's brochure describes a monthly sum insured agreed at the start of the cover, paid at the end of the waiting period, for up to six months.
The waiting period is where the two differ most. Chubb's is four weeks. AIA's is the greater of four weeks and the number of weeks, up to 13, that your redundancy pay could reasonably replace your income, worked out as the total after-tax redundancy payment divided by your average weekly income net of tax for the six weeks before the redundancy took effect. A decent redundancy payment therefore pushes AIA's first payment out to more than four months after the last day, because the waiting period runs from the date the redundancy takes effect and the first payment comes a month after it ends.
Both require you to keep looking. AIA may stop paying if, in its opinion, you do not make reasonable efforts to obtain employment, which it says includes registering with a recruitment agency or Work and Income, or if you leave New Zealand for 28 days or more. It also asks, at claim time, for evidence of the redundancy, your income for the six weeks before it, your continuing unemployment, and any earnings or work during the claim.
Who cannot claim
The exclusions do most of the work in these products, and the first one catches almost everyone who thinks of buying cover after a proposal lands. AIA will not pay if you or the life assured knew or ought to have known at the risk commencement date that the life assured could be made redundant. Chubb will not pay if you knew you would be made redundant or might be made redundant when the cover started. A restructure that has been announced, consulted on, rumoured in a credible way, or foreshadowed in a budget is exactly that, and a policy bought during it is a premium paid for nothing.
Both also exclude the early months. AIA will not pay if the redundancy occurs within six months of the risk commencement date, or if you were not an earner, meaning employed in a permanent position for an average of at least 20 hours a week, for the six months before the redundancy. Chubb excludes a redundancy within the first 180 days of employment. And both exclude voluntary redundancy: AIA's definition of redundancy does not include a situation where the life assured voluntarily elects redundancy, and Chubb lists voluntary resignation, redundancy or retirement among the things not covered.
The rest of the list is about the shape of the work. Chubb excludes redundancy from seasonal, temporary or relief work, redundancy because a fixed-term contract expired or was not renewed, the self-employed, situations where you or a relative controls the employer, and redundancy caused by a strike or labour dispute you were involved in. AIA excludes a redundancy where the employer is owned or controlled by you, the life assured or a close relative, redundancy while outside New Zealand unless you return within 28 days, and periods of imprisonment or home detention.
| Exclusion | AIA wording | Chubb brochure |
|---|---|---|
| Knew or should have known | Excluded if known or ought to have been known at risk commencement | Excluded if you knew you would or might be made redundant when cover started |
| Early in the policy or the job | Within six months of risk commencement; not an earner for the prior six months | Within the first 180 days of employment |
| Voluntary redundancy | Not redundancy under the definition | Not covered |
| Fixed-term, seasonal, temporary | Earner means a permanent position of at least 20 hours a week | Fixed-term expiry, seasonal, temporary and relief work not covered |
| Self-employed or family-controlled employer | Excluded where you or a close relative owns or controls the employer | Excluded if self-employed or if you or a relative controls the employer |
| Overseas | Excluded unless back in New Zealand within 28 days; may cease after 28 days away | Not stated in the brochure |
What to do now
If you hold a policy with a redundancy benefit, tell the insurer before your last day and get the redundancy letter with the date and the reason, because the waiting period runs from the date the redundancy takes effect and the claim will need proof of it. Register with Work and Income, apply for Jobseeker Support on or before the last day so the stand-down starts running, and keep a record of every application you make, since the insurer can ask for evidence of continuing unemployment and of your efforts to find work.
Read the benefit period against the stand-down and the arrears week. A two week stand-down plus a week in arrears means about three weeks before the first Work and Income payment; AIA's waiting period on a reasonable redundancy payment means months before the first insurance payment; and the benefit stops the day you start work again. The two are not designed to overlap neatly, and the cash to bridge the gap comes from the redundancy payment, which is why the stand-down calculator in this series exists.
If you do not hold cover, the honest position is that none is available to you now for this restructure. The alternatives are the ones the rest of this pathway already covers: the payment after tax, the stand-down and the benefit, the KiwiSaver hardship rules as a last resort, and the contracting decision. Cover bought after this round, if you want it, is for the next one, and the six month exclusion means it starts protecting you only well into next year.
Not whether redundancy cover is worth it, but what the waiting period would have been on your last redundancy payment, and how many of the exclusions your job passes. An adviser who can answer both from the wording has read it.
Related guides and tools
- Redundancy Checklist, notifying the insurer sits in the first week of the last fortnight
- Work and Income Stand-Down Calculator, the gap the redundancy payment has to bridge before any benefit
- Income Protection Insurance Calculator, the cover these redundancy benefits attach to
- Voluntary Redundancy, why volunteering can void a redundancy benefit
Test Your Knowledge
Ten questions on how redundancy cover is sold, what the two published wordings pay, the waiting periods, and the exclusions that catch most claims.
Sources: AIA Living Personal Optional Benefit Appendix, Redundancy Benefit, policy wording 1113 AL-RED version 1 effective 5 August 2019; Chubb Life Assurance Extra Redundancy Cover brochure CIG0015 V3, information current as at August 2022; both read on 3 September 2026. Work and Income, stand-down periods, read 3 September 2026.