Income Protection Insurance NZ: Benefits and Costs Explained

Income protection insurance is a vital safety net for Kiwis, providing a financial cushion in case you're unable to work due to illness or injury. This type of insurance can replace up to 75% of your income if you're unable to work for more than 30 days.

Having a stable income is crucial for paying bills and living expenses, and income protection insurance can help ensure you can continue to do so even if you're unable to work. The average payout for income protection insurance in New Zealand is around $1,500 per month.

Many New Zealanders rely on their income to support their families, and income protection insurance can provide peace of mind knowing that your loved ones will be taken care of if you're unable to work. By paying a premium each month, you can rest assured that you'll have a financial safety net in place.

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Income protection insurance is a type of insurance that provides a monthly payment if you're unable to work in your occupation due to an injury or illness.

This insurance can support you long after your sick leave entitlement runs out, giving you the financial freedom to focus on your recovery.

You can use the monthly cash benefit for a wide range of expenses, including rehabilitation or therapy, and medications not covered by PHARMAC.

Groceries and utility bills are also covered, so you can keep up with your daily living costs without worrying about how you'll pay.

Here are some examples of how you can use your income protection insurance benefits:

If you're wondering who can buy income protection insurance in New Zealand, the good news is that most people can apply.

Working New Zealand residents aged 16 – 60 can apply, which means whether you're just starting out in your career or have years of experience, you're likely eligible.

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You can apply for income protection if you're 16 to 55–60 years of age, which is a pretty wide age range. The maximum entry age varies across insurers, so it's worth shopping around to find the best deal.

To be eligible, you must be employed, either full-time or part-time, or self-employed, and you must be a New Zealand citizen, a permanent resident, or have a long-term business visa or a work permit in the country.

Some high-risk occupations, such as armed forces personnel, police, prison guards, firemen, coal miners, professional divers, and pilots, are not eligible for income protection cover due to the nature of these occupations and the risks they present.

Self-employed individuals can apply for income protection cover, and it's a good idea to speak with a Policywise adviser to get a free quote comparison and find the right insurance product for your situation.

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Policy is a crucial aspect of income protection insurance in NZ.

The Income Protection Insurance Policy must be approved by the Financial Markets Authority (FMA) to ensure it meets the required standards.

Most policies require you to have a minimum level of income to qualify for cover, which can be a significant amount, often around $20,000 to $30,000 per annum.

The policy will typically have a waiting period, usually 30 to 90 days, before you can claim benefits if you become unable to work.

Premiums for income protection insurance in NZ are usually tax-deductible, which can be a significant advantage.

You can choose from various policy options, including short-term and long-term cover, to suit your individual needs.

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Income protection insurance in NZ offers a range of benefits to ease the financial challenges of a major sickness or injury. You can insure up to 75% of your annual pre-tax income, which can be a huge relief during tough times.

Some common built-in benefits include Total Disability Income Benefit, Partial Disability Income Benefit, and Rehabilitation and Support. These benefits can provide a vital income stream if you're unable to work due to sickness or injury.

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Income protection insurance also offers optional benefits, such as Claim Indexation Benefit, Redundancy Cover, and Retirement Protection. These benefits can provide additional financial security and peace of mind.

You can also get benefits like Home Modification and Equipment Expense Benefit, Back to Work Payment, and Pregnancy Premium Waiver. These benefits can help with the extra costs associated with a major sickness or injury.

Here are some of the benefits you can expect from income protection insurance in NZ:

These benefits can provide a financial safety net and help you get back on your feet during a difficult time.

If you need to make a claim on your income protection insurance, you can do so by contacting your insurer as soon as possible. Your policy provides 31 days' grace for any premium due, so don't panic if you miss a payment.

You can pay your premiums by Direct Debit from a New Zealand bank account, Credit Card (Visa or MasterCard), or Debit Card. You can also change your payment method at any time.

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If you miss a premium payment, you should contact AIA as soon as possible and make arrangements to pay the missed premium. If you do nothing, and the premium remains outstanding beyond the 31-day grace period, then AIA is entitled to cancel your policy.

You can pay your premiums weekly, fortnightly, monthly, or annually. If you pay your premiums weekly or fortnightly, you can choose which day of the week your premiums are deducted. If you pay monthly, you can choose which date your premiums are deducted each month.

Some benefits may be offset by other income you receive, such as sick pay from your employer or ACC entitlements. These benefits will be deducted from your income protection benefit.

You can receive a discount of 4.76% on the total benefit cost if you pay your premiums annually. Your first premium will not be deducted until at least 10 days after your policy is issued.

If you need to file a claim, consider doing so as one of your top priorities. You can contact your insurer or a claims assitant for guidance through the claims process.

Here are some key things to know about making a claim:

The waiting period for your first payment depends on the waiting period you selected when you bought your income protection policy. For example, if you choose a 4-week waiting period, your monthly payouts will start after 4 weeks.

Income protection insurance can be a valuable safety net, but it's essential to understand the costs and premiums involved. As a general rule, income protection can cost around 3% of your pre-tax income.

For example, if you earn $100,000 a year before tax, income protection insurance might cost you $3,000 a year, or around $58 a week. However, this is just a ballpark figure, and your actual cost will depend on several factors.

Your gender can impact your premiums, with women typically paying more due to their higher risk of certain illnesses. Additionally, the amount of income you're insuring, your wait period, and whether you smoke or vape can all affect your premiums.

If you have a high-stress job or a pre-existing medical condition, you may also pay higher premiums due to your increased risk of needing to make a claim. This means the cost of premiums can vary widely between people.

Here are some key factors that can impact your income protection premiums:

Income protection insurance in NZ comes in three distinct flavours, each designed to cater to different needs and circumstances.

There are three different types of income protection insurance, which can be thought of as flavours.

Let's break them down: each flavour offers a unique benefit that can help you navigate financial challenges when you're unable to work.

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Having a pre-existing medical condition can raise your premiums because you have a higher chance of needing to make a claim.

A high-stress job can also increase your premiums for the same reason.

Your premiums may vary widely between people due to these factors.

Hannah and Mike, who own a hotel, may see their premiums change depending on their monthly income, which can range from $10,000 to $2,000.

Here are some key factors that can increase your income protection premiums:

Income protection insurance comes in three distinct flavours, each serving a specific purpose.

The first flavour is designed to provide a replacement income in case of illness or injury.

These policies can be tailored to meet individual needs, offering a range of benefits and features.

The second flavour focuses on providing a lump sum payment to cover unexpected expenses.

This can be a lifesaver during difficult times, helping to keep the wolf from the door.

The third flavour offers a combination of both replacement income and lump sum payment.

This comprehensive approach can provide peace of mind and financial security.

There are 3 different types of income protection insurance, which can be thought of as flavours.

Your home is your haven, and mortgage protection insurance can help you make your mortgage repayments on time, even in tough times.

You can think of mortgage protection insurance as a safety net that ensures your mortgage is paid, even if you're unable to work.

In New Zealand, mortgage protection insurance is essential for property owners because it helps them keep their home, even when life gets difficult.

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Comparing income protection insurance products from multiple insurers allows you to choose the best product for your circumstances at the best price. At Policywise, we make comparing income protection insurance quotes simple and easier for you, and it’s free!

Comparing income protection insurance can be overwhelming, but there are alternatives and complementary insurance products to consider. Workability insurance, for example, provides a monthly benefit if you have to stop working due to an illness or injury that is not covered by ACC.

Workability insurance is more affordable than income protection, but it doesn't come with as many benefits. You can receive up to 75% of your pre-disability income and may also cover rehabilitation costs to help you get back to work.

If you suffer a critical illness, trauma/critical illness insurance can provide a lump sum benefit that you can use for health-related and living expenses. However, if you're unable to work due to an uncovered condition, you can't file a critical illness claim.

Health insurance covers your healthcare expenses if you go to private facilities for faster diagnosis, surgery, or other treatments or require expensive non-PHARMAC-funded drugs. It won't provide monthly payouts, but you can use your income protection benefits to cover living expenses while you recover.

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

Comparing income protection insurance products can be overwhelming, but there are ways to make it simpler.

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

Comparing income protection insurance can help you to still receive an income should you become unable to work due to illness or injury.

It's essential to review income protection cover details carefully to ensure you get the best product for your needs.

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If you're looking for income protection alternatives, there are a few options worth considering. Workability insurance is one such alternative, providing a monthly benefit if you have to stop working due to an illness or injury not covered by ACC.

Workability insurance is more affordable than income protection but doesn't come with as many benefits. For example, it only pays up to 75% of your pre-disability income.

If you suffer a critical illness like cancer or stroke, trauma/critical illness insurance pays out a lump sum benefit. This can help with health-related and living expenses, but it won't replace lost income if you're unable to work due to an uncovered condition.

Health insurance covers your healthcare expenses if you go to private facilities or require expensive non-PHARMAC-funded drugs. However, it won't provide monthly payouts for living expenses.

Here are some key differences between these alternatives:

Income protection insurance payouts are considered taxable income by the IRD, meaning you'll need to pay tax on them.

You can deduct your income protection premiums if any claimed income insurance payout is taxable, according to the Inland Revenue Department.

This means you'll get to claim back some of the money you paid in premiums, which can help reduce your tax bill.

Income protection insurance payouts are generally subject to income tax, so it's essential to factor this into your financial planning.

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Income protection insurance can be a lifesaver in unexpected situations, but it's essential to understand the special cases and situations where it may not apply or have limitations.

If you're self-employed, your income protection insurance may not cover business-related income, leaving a significant gap in your financial safety net.

For example, if you're a freelancer or contractor, your income protection insurance may only cover a portion of your business income, or have specific conditions that need to be met.

In some cases, income protection insurance may not cover income earned from investments or rental properties, which can be a significant source of income for some individuals.

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Redundancy can be a stressful and uncertain time. Some insurers offer an optional redundancy cover that provides a monthly payout for several months if you're made redundant.

This type of cover can be a lifesaver if you're not working, and it's worth considering if you're in a high-risk industry. Insurers that offer redundancy cover will provide you with a monthly payout.

You can also opt to suspend your cover if you're made redundant, but keep in mind that you won't be able to make claims for injuries or illnesses during the suspension period.

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Income protection won't pay you a monthly benefit if you're unable to work due to pregnancy.

Some insurers may waive your premiums for a specific period during and after your pregnancy, keeping your policy in force.

Pregnancy complications can lead to a disability that lasts longer than three months after the end of your pregnancy, which may be covered by insurance protection.

Insurance protection may cover you for a disability resulting from pregnancy, but it's essential to check your policy details.

If you're planning a trip overseas for work or leisure, you're likely wondering about your coverage. Yes, you remain covered even when you're in another country for work or leisure.

Losing your pay for even a short time can have an impact on you or your family's quality of life.

Income protection can help you make sure your family carries on eating nutritious meals. This is especially important for kids, who need a stable diet to stay healthy and focused in school.

Losing your income can also affect your ability to pay for school fees, which can be a significant financial burden.

Providing for your dependants is a crucial aspect of being a responsible breadwinner, whether you're the sole earner or part of a dual-income household.

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You can cancel your income protection insurance policy at any time, but be aware of the consequences. If you cancel within the first 15 days of receiving your policy, you'll get a full refund of any premiums paid.

You can still cancel after the free-look period, but you won't receive a refund of any premiums paid. This is a good thing to keep in mind if you're considering canceling your policy.

If you're having trouble paying your premiums, don't worry - your policy provides a 31-day grace period. This means you can miss a payment without your cover immediately stopping, but you should contact AIA as soon as possible to make arrangements to pay the missed premium.

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You can view or download a copy of the policy wording at any time if you have questions. AIA Living policies contain an Enhancement Pass Back Benefit, which means favourable changes to the policy wording will automatically be applied to your policy.

You can change your cover to match an increase or reduction in your income and/or financial obligations. This can be done after the policy is issued.

You can talk to a Policywise adviser to get more information about each insurer's policies or requirements when adjusting cover amounts.

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If you're considering adding a new income protection policy to an existing one, be aware that the payouts from both policies will be deducted from each other. This means you'll essentially be paying double for the same cover amount.

You should be careful about getting a second policy if you intend to keep your current income protection cover. The payouts from your first policy, plus any from other sources like ACC or your employer, will be subtracted from the benefits under the second policy.

Having two income protection policies might seem like a good idea, but it's not always the most cost-effective or practical solution.

Your home is your haven, and keeping up with rent or mortgage payments is crucial. Your monthly income protection benefits can help you make your mortgage repayments or your rent on time.

A 4-week waiting period is a common choice for income protection, and if you select this, your monthly payouts will start after 4 weeks.

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Mortgage protection insurance is essential for property owners in NZ, as it ensures your mortgage is paid, even in tough times. This can give you peace of mind and financial security.

Your home is your haven, and knowing you can make your mortgage repayments or rent on time can be a huge relief.

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You can cancel your policy at any time, and there's a 15-day free-look period where you can get a full refund of any premiums paid if you change your mind.

If you cancel within this free-look period, you'll get a full refund, but if you cancel after that, you won't receive a refund of any premiums paid.

You can still cancel your policy after the free-look period, but you'll need to understand the reasons that might affect your cancellation.

Here are some reasons that might affect your cancellation: