Your guide to income protection insurance

If you’ve ever been off work due to illness or injury, you’ll know how quickly life can change. Bills, groceries, mortgage payments – they don’t stop just because you do.

Income protection gives you breathing room. You’ll get a monthly payment if you can’t work due to an injury or illness, helping you stay on top of expenses so you can focus on your recovery. It’s also a way to safeguard your financial wellbeing, helping you maintain stability and avoid long-term financial stress.

It can also step in where ACC may not apply. While ACC provides support for some injuries, it doesn’t cover things like illnesses, trauma, or disabilities from events like a stroke. Income protection covers a wide range of health issues that prevent you from working – not just accidental injuries.

And because it replaces part of your lost income, you might not need to dip into savings. That means you can keep those funds for your long-term goals like your kids’ education, travel, or retirement.

Imagine being able to focus on your recovery without worrying about overdue bills or using up your nest egg. That’s the kind of peace of mind income protection offers.

Unlike life insurance, income protection doesn’t pay out a lump sum. It’s designed to replace part of your income while you’re unable to work due to illness or injury.

If your claim is approved, you’ll receive regular payments to help cover your living expenses while you recover or the benefit period ends. Depending on your policy, this period could be two years, five years, or even until age 65 or 70.

There’s also a waiting period – the time between when you stop working and when your payments begin. This can vary, so it’s important to choose a timeframe that fits your financial situation and to think about ways you could start saving for an emergency fund to cover the waiting period. 

Income protection typically covers things like:

• Illnesses, including both physical and mental health conditions
• Injury, whether it happens at work, home, or elsewhere
• Partial disability – if you can return to work part-time, some policies may still pay a benefit to top up your income.

You can tailor your policy with extras, too. For example, our trusted insurance partner, Chubb Life offers options that help with costs like wheelchairs, childcare, emergency transportation, and physical therapy.

Depending on your needs, it might make sense to combine income protection with other types of insurance – like life or critical illness cover – for more complete peace of mind.

By covering a wide range of health-related disruptions, income protection plays a key role in supporting your financial wellbeing while you recover.

Like all insurance, income protection comes with some exclusions. Common ones include self-harm, or injuries that happen while doing something illegal.

Pregnancy isn’t usually included, although there may be exceptions if you have complications that last more than 90 days after giving birth.

Income protection also doesn’t cover things like losing your job due to redundancy or quitting voluntarily. It’s specifically for times when your health prevents you from working.

It’s important to understand what your policy does and doesn’t cover, so there are no surprises later.

So how much can you expect to pay for income protection insurance? 

That depends on a range of factors, including your income, job, lifestyle, and any extra benefits you add to your policy. 

One way to reduce your premiums is to choose a longer waiting period between when you stop working and when your payments begin. So it’s worth thinking about how long you could rely on sick leave or savings before your cover kicks in. 

If your income changes – or you switch industries – let your insurer know. These changes can affect both your premiums and how much you get if you need to claim.

If you rely on a regular income – whether employed, self-employed, or a contractor – it’s worth considering income protection. But it can be especially helpful if:

• You have financial commitments like rent, a mortgage, dependents, or personal debt
• You’re the only income earner in your household
• You’d struggle to cover living expenses if you were off work for more than a few weeks, even with government support
• You don’t have access to generous sick leave or employer support
• You’re self-employed and don’t have a financial fallback.

Because income protection is tied to your earnings, it might not be the right fit if you’re not earning money right now – for example, if you’re retired or a stay-at-home parent.

But if you’re earning an income and have financial responsibilities, income protection can be a smart way to help support your financial wellbeing and reduce stress during uncertain times.

Big life changes – like starting a new job, growing your family, or buying a home – are great times to review your insurance and see if income protection is right for you. These milestones often bring new financial responsibilities, so it’s worth checking whether your current cover still fits your needs.

Many of us take our health and our ability to work for granted, especially when we’re young. But life can change quickly. If you and your loved ones depend on your income and don’t have a large financial cushion, income protection can be a smart way to support  your financial wellbeing.