Calculate how much income protection cover you need, the right waiting period and benefit period, and estimated monthly premiums. Designed specifically for New Zealand, including the critical ACC illness gap that catches most Kiwis by surprise.
ACC only covers accidents: it does not cover illness such as cancer, heart disease, stroke, or mental health. Income protection insurance fills this gap by paying a monthly benefit (typically up to 75% of your pre-tax income) if you cannot work due to illness or injury.
The calculator models your benefit amount, premium trade-offs across different waiting periods (2 to 104 weeks) and benefit periods (1 year to age 65), cover types (agreed value vs indemnity), and the tax treatment of both premiums and benefits. Uses current NZ market data from AIA, Partners Life, Chubb Life, Fidelity Life, Asteron, and MAS as at April 2026.
ACC covers accidents only. It does NOT cover illness such as cancer, heart attack, stroke, diabetes, mental health conditions, chronic fatigue, autoimmune diseases, or any non-accidental condition that prevents work.
Statistics NZ research suggests 1 in 4 working-age New Zealanders will face a serious illness before retirement. Without income protection, most of these people have no income replacement at all for illness-related absences beyond their sick leave entitlement.
How your premium changes based on waiting period (vs 4-week baseline):
| Waiting Period | Est. Monthly Premium | Annual Premium | Savings vs 4wk |
|---|
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).
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.
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.
| Waiting Period | Best For | Premium Impact |
|---|---|---|
| 2 to 4 weeks | Self-employed, no sick leave, minimal savings | Most expensive |
| 8 to 13 weeks | Standard employee with ~2 weeks sick leave and 2-3 months savings | Moderate |
| 26 weeks | Strong savings buffer (6+ months expenses) | Approximately 48% cheaper than 4-week |
| 52 weeks | Very strong buffer, high earners with substantial liquid assets | Approximately 58% cheaper than 4-week |
| 104 weeks | Those using it purely for catastrophic long-term illness cover | Approximately 65% cheaper than 4-week |
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.
| Aspect | ACC | Income Protection Insurance |
|---|---|---|
| Covers accidents? | Yes | Yes |
| Covers illness? | No | Yes (cancer, heart disease, stroke, mental health, etc.) |
| Benefit amount | 80% of pre-injury earnings (capped) | Up to 75% of pre-tax income |
| Waiting period | 1 week (paid by employer) | Your choice (2 to 104 weeks) |
| Benefit duration | Until able to work or retirement | Your chosen benefit period |
| Funded by | Earners' levy (1.52% in 2026/27) | Your insurance premium |
| Self-employed access | Yes (must opt in for CoverPlus) | Yes (highly valuable) |
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.
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.
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.
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.
Review your income protection cover when any of the following happens:
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.
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