Income Protection Insurance

What ACC Actually Covers (And What It Doesn't)

ACC covers injuries from accidents — at work, on the road, at home — with weekly compensation while you recover. But illness is a different story entirely.

The Ministry of Health identified chronic illness as a major cause of long-term disability in New Zealand in a 2022 report. Conditions like cancer, heart disease, diabetes complications, and mental health disorders are responsible for a significant portion of long-term work absences. None of these are covered by ACC.

Think about that for a moment. The thing most likely to stop you working for an extended period — illness, not injury — is the thing the government safety net doesn't cover.

What Income Protection Insurance Actually Does

Income protection insurance pays you a regular monthly benefit — typically up to 75% of your pre-tax income — if you're unable to work due to illness or injury. It's not a lump sum. It's ongoing income replacement, paid monthly, and in most cases it's tax-free.

Say your income is $6,000 a month. Your policy would pay approximately $4,500 per month while you can't work. That's your mortgage. Your groceries. Your power bill. Your life, more or less intact.

The 75% cap isn't arbitrary — it's structured so there's still an incentive to return to work when you're able. But 75% of your income, paid monthly, is the difference between keeping your home and losing it.

Coverage Details

Income protection covers you if you cannot work due to total or partial disability from illness or injury. Policies typically include coverage for physical illness, mental health conditions (subject to terms), injury from any cause, chronic conditions that prevent you working, and recovery periods following surgery or treatment.

You choose your waiting period (how long after you stop work before payments begin) and your benefit period (how long payments continue). Most New Zealanders choose a 4-week or 13-week waiting period to match their sick leave and savings, with benefits continuing to age 65 for maximum protection.

Premiums aren't one-size-fits-all. Several factors influence what you'll pay:

Age — The older you are, the higher the risk of illness or injury, which increases premiums. A 30-year-old pays significantly less than a 50-year-old for the same cover.

Occupation — A desk-based professional and a construction worker face very different risk profiles. Manual workers and those in high-risk industries typically pay higher premiums.

Health history — Pre-existing conditions may affect what's covered or increase your premium. Insurers assess your current health status and medical history during underwriting.

Smoking status — Smokers pay substantially more due to increased health risks. Quitting smoking can reduce your premiums over time.

Waiting period chosen — Longer waiting periods (how long before benefits start) significantly reduce premiums. A 13-week wait costs much less than a 2-week wait.

Benefit period selected — How long benefits continue affects cost. Cover to age 65 costs more than 2-year or 5-year benefit periods, but provides much better long-term protection.

Sum insured — The monthly benefit amount you select. Higher monthly payments mean higher premiums, but ensure adequate coverage of your expenses.

Getting these settings right for your specific circumstances is where the difference between a useful policy and inadequate cover is made. Every business owner, tradesperson, and professional has a different financial buffer and risk profile. Your policy should reflect that reality.