Life’s good, until it’s not.
You could be earning your regular income, paying off the bills, maybe thinking of going on a vacation, or dealing with the mortgage. Then one diagnosis, one bad fall, one unlucky twist can stop your income overnight. The question isn’t if something could happen, but how prepared you’d be if it did.
Income protection insurance is one of those things most Kiwis don’t think about until it’s too late. Yet it’s often the difference between staying afloat and sliding into financial stress. If you rely on your pay to keep your household running, here are seven reasons why it’s worth having income protection insurance.
1. Your Pay Is Your Biggest Financial Asset
Forget your house or car, your ability to earn is what funds everything else. The average Kiwi spends more than $1,300 a week on essentials. The Jobseeker benefit for a couple with children? Around $390 a week. That gap adds up frighteningly fast.
If you become unable to work because of an illness or accident, income protection will take over and substitute some of your earnings (usually the percentage is 75% of the pre-tax income). This way, you can keep your financial situation unchanged, continue paying the bills, and take care of the kids without losing any money from your savings.
When you protect your income, you’re not buying “insurance.” You’re protecting your lifestyle.
2. ACC Only Covers Accidents, Not Illness
Most Kiwis assume ACC will step in no matter what. It won’t. ACC covers injuries from accidents, like a broken wrist at work or a sprain from sports. It does not protect you against all the illnesses or conditions that prevent you from working for months.
Among these health problems are cancer, heart disease, stroke, and even burnout, which do not get covered by ACC. Income protection fills that gap. It steps in when ACC doesn’t, giving you a steady income whether your setback was physical, mental, or medical.
3. You’ll Have Breathing Room When You Need It Most
When you take financial pressure off recovery, you heal better and faster.
Being sick or injured is hard enough. It is stress that everyone has to deal with, and income protection is the one to give you a little bit of room, so you can go on focusing on healing instead of just hanging on.
Every month, you will be receiving the payments after signing off from work. It means that you will not have to take money from the KiwiSaver or use up the credit cards.
In most cases, the policies also offer rehabilitation assistance, which can be in the form of physiotherapy, counselling or retraining cost coverage, thus resulting in a faster recovery for you generally.
4. It Protects Your Family’s Stability
If you’re the main earner, losing your income doesn’t just affect you. Mortgage, rent, electricity, and child care all depend on that salary being credited to your account. For families with kids, even just a few missed payments might ruin the stability which was built over the years.
Income protection ensures that your family will not change their usual routine; school fees, groceries, petrol, and even after-school activities will continue. You are not just protecting your monthly salary; in fact, you are providing your spouse with a worry-free environment and your children's normality.
5. It Keeps Your Long-Term Goals On Track
Every long-term goal is put on hold without an income.
- Mortgage repayments: If you happen to miss a couple of months, it will add up to the interest.
- KiwiSaver or investments: No contributions result in slower growth.
- Debt repayment plans: Credit cards and personal loans can pile up really fast.
A temporary setback shouldn’t rewrite your entire financial story. Income protection makes sure that even during your healing process, you can still be a contributor and thus secure your future as well as that of your present.
6. It’s More Flexible (and Affordable) Than You Think
Many people skip income protection because they assume it’s complicated or expensive. It’s not, especially when tailored right. You control the key settings:
- Waiting period: How long before payments start? Longer waits mean lower cost.
- Benefit period: For how long do you receive payments? Shorter terms equal cheaper premiums.
- Coverage level: Insure the percentage of income you actually require, not the maximum.
Policies may contain optional extras like rehab benefits, premium waivers during redundancy, or support for home modifications after injury. It is flexible coverage that is tailored according to your needs (or shrinks), rather than being a one-size-fits-all plan.
7. It’s Peace Of Mind You Can’t Put A Price On
The truth is, insurance isn’t bought for today; it’s bought for the worst day. Even with savings, most households could last less than three months without a regular income.
Income protection transforms a potential financial freefall into a controlled pause. It replaces uncertainty with confidence: knowing that if life throws a curveball, your home, plans, and dignity stay intact.
When Might It Be Less Essential?
Income protection may not be necessary if:
- You have significant savings or passive income that can comfortably support you for a year or more.
- You’re retired or not in paid employment.
- Your partner’s income alone could easily cover all household costs.
However, think about whether that safety net would last as long as a serious illness might last. Most recoveries take longer and cost more than we think.
Common Misconceptions (and The Real Answers)
- “I already have life insurance.”
Life cover pays a lump sum when you pass away, not while you’re alive but can’t work. Income protection is what keeps things running while you’re still here.
- “I’ll rely on savings.”
Savings fade faster than you think. Income protection preserves them for real emergencies instead of monthly bills.
- “I’m young and healthy.”
That’s exactly why it’s cheaper now. Illness and injury don’t check your calendar; they just happen.
Quick Tips To Make Cover Work Harder For You
- Review annually. Update your cover when your income or expenses change.
- Bundle smartly. Combine with trauma insurance or life insurance for full protection.
- Talk to an adviser. They are able to help you find the right balance of cost and coverage among different insurers.
- Do not over-insure yourself. Concentrate on your actual monthly expenses, not on the total salary.
- Be transparent. Disclose health history honestly to avoid claim complications later.
FAQs
Q. How Much Of My Income Can I Cover?
Ans : Up to 75% of your pre-tax income, depending on your insurer.
Q. Does It Pay If I’m Made Redundant?
Ans : Not typically, it’s for health-related work loss. Some policies waive premiums during redundancy.
Q. Are Payments Taxable?
Ans : This depends on how the policy has been structured. Speak to your tax adviser for details.
Q. How long do payments last?
Ans : You can opt for short-term (2 or 5 years) or long-term (to age 65) options.
Q. Is it possible for me to get it if I am self-employed?
Ans : Absolutely. In fact, it’s essential since you don’t get paid sick leave.
Conclusion
So, to answer the question whether Income Insurance is really needed, the answer is yes. For Most Kiwis, It’s Worth It
If you earn an income that others depend on, or that keeps your life stable, income protection insurance is more than worth it. It’s not an investment in “what if”; it’s a safety net for when it happens.
Talk To The Team That Gets It
At NZ Insurances, we know life doesn’t come with guarantees, but good cover gets you close. Our advisers can compare policies from trusted New Zealand insurers like Partners Life, AIA, Chubb Life, Fidelity Life, and Asteron Life, tailoring them to your income, lifestyle, and budget.
Are you fully covered? Talk to NZ Insurances today.
