How Would You Pay the Bills if You Couldn't Work?
Life can be unpredictable. One day you’re healthy and earning a regular income, the next you’re dealing with an unexpected illness or injury that stops you from working. That’s where Income Protection Insurance can make a big difference.
This type of insurance provides a monthly payment (usually a percentage of your usual income) if you're unable to work due to health reasons. It helps cover everyday expenses like rent or mortgage, groceries, utilities, and other bills while you focus on getting better.
It’s not about making you rich, it’s about helping you maintain stability when life throws you off course.
What Does Income Protection Cover?
Income Protection Insurance typically kicks in when you’re signed off work by a doctor due to illness or injury. The condition doesn’t have to be extreme, it could be anything from a serious back injury to a long recovery from surgery or even mental health conditions like anxiety or depression.
Once your claim is approved you’ll receive regular monthly payments. These usually start after a waiting period (sometimes called a stand-down period) which you choose when setting up your policy. The shorter the wait, the higher the premium tends to be.
Payments can continue for a set time (such as two or five years) or right up until retirement age, depending on your policy.
How Much Will I Receive?
You won’t receive 100% of your salary. Most policies pay out around 75% of your regular income. That’s usually enough to keep your financial life on track while you recover.
For example, if you earn $4,000 a month your policy might pay $3,000 each month while you’re off work. That can cover your rent or mortgage, food, phone bill, and other essentials. It should ensure you don’t have to dip into your saving or take on debt.
How Is It Different from ACC?
It’s easy to confuse Income Protection with ACC (Accident Compensation Corporation), especially in New Zealand. They’re not the same thing.
ACC covers injuries that result from accidents. This includes things like a fall, a car crash, or a sports injury. It won’t cover you for illness, mental health issues, or many long-term conditions.
Income Protection fills this gap. It covers both accidents and illnesses that stop you from working. In fact, most claims for income protection are due to illness and not accidents.
It’s also worth noting that if you’re receiving payments from ACC your Income Protection benefit may be reduced (so you’re not being paid twice). This is something to check when choosing your policy.
Who Needs Income Protection?
Income Protection is especially important for people who rely on their income to meet financial obligations — and that’s most of us.
It’s worth considering if:
You don’t have enough savings to cover months off work
You’re self-employed or a contractor with no sick leave
You have a mortgage, rent, or children to support
Your household depends on your earnings
Even if you have some sick leave it may not be enough for a long-term illness or injury. Income Protection steps in when that runs out.
Choosing the Right Policy
Policies vary. It’s important to tailor your cover to your situation. When choosing a plan consider:
Waiting period – how long you wait before payments start
Benefit period – how long the payments last (e.g. 2 years, 5 years, or to age 65)
Amount covered – what percentage of your income is protected
Premium type – some premiums stay level, others increase with age
An adviser can help you weigh up the pros and cons and choose a policy that suits your budget and risk.
A Financial Safety Net When You Need It Most
Getting sick or injured is stressful enough without having to worry about how to pay the bills. Income Protection Insurance provides peace of mind that your finances won’t fall apart while you recover.
It’s not just for older people or those in risky jobs. Anyone who relies on their income can benefit from this type of cover. Losing your ability to earn, even temporarily, can happen to anyone.
With the right policy in place you can rest easier knowing that if the unexpected happens you’ll have time and support to get back on your feet.