Mortgage protection insurance is the kind of cover you only notice when you need it. When your income is flowing, it feels optional. When illness or injury knocks you out of work, and the mortgage still expects its money every single month, it suddenly becomes the most practical insurance conversation you can have.
This guide explains what mortgage protection insurance is in New Zealand, what it covers, what it typically costs, and how to structure it properly so it does the job it’s meant to do: help you keep your home if you can’t work.
What is mortgage protection insurance?
Mortgage protection insurance (sometimes called mortgage repayment cover) is designed to pay you a monthly benefit if you can’t work for an extended period due to sickness or injury. The goal is simple:
- Keep your mortgage repayments (or rent) going
- Reduce the risk of falling behind
- Protect your household from a financial free-fall while you recover
It’s not house insurance. It’s not life insurance. It’s specifically about income disruption and housing payments.
What does mortgage protection insurance cover in NZ?
Most mortgage protection policies in NZ are built around disability definitions, meaning you can claim if illness or injury leaves you totally or partly unable to work.
Total disability cover
This is when you can’t work at all (based on your policy definition). If you meet the criteria and your claim is accepted, the insurer pays a regular monthly amount.
Partial disability cover
This is when you can return to work in a limited capacity (reduced hours or reduced duties) but not fully. Many policies pay a partial benefit, so you’re not punished for trying to get back on your feet.
What can the money be used for?
Even though it’s called mortgage protection, payments generally help with:
- Mortgage repayments or rent
- Utilities, groceries, rates
- Basic household bills that don’t pause just because you’re unwell
That flexibility matters because when your income drops, everything gets tight, not just the mortgage.
What mortgage protection usually does NOT cover?
This is where people get caught out, so let’s be blunt.
- Pre-existing conditions may be excluded, or your premium may be higher, depending on underwriting.
- If you stop working voluntarily, claims usually won’t apply.
- Redundancy is not always included automatically (often it’s an add-on benefit, and it comes with strict criteria).
Not every policy covers every situation. Definitions and limitations matter. This is why policy wording and adviser summaries are important. Not because we love fine print, but because fine print decides whether you get paid.
Key features that matter most
Mortgage protection insurance is not just “yes or no”. It’s built with settings. The right settings decide whether it’s affordable and useful.
- Monthly benefit amount: You choose how much you want to be paid monthly. In NZ, insurers commonly cap benefits based on:
- Percentage of your income, and/or
- up to 115% of your mortgage or rent repayments (depending on the product structure)
- Waiting period: This is how long you wait after being unable to work before payments start. Common waiting periods include 2 weeks, 4 weeks, 8 weeks, 13 weeks, and longer options (right out to 104 weeks)
- Shorter wait = higher premium.
- Longer wait = cheaper premium, but you need savings to cover the gap.
- Benefit period: This is how long you can receive payments for a claim. Typical options:
- 2 years
- 5 years
- or to age 65 (sometimes to age 70 for some occupations)
Longer benefit period = higher cost, but stronger long-term protection.
- Rehabilitation and return-to-work support: The best policies don’t just pay you. They help you get back to work through:
- Rehabilitation programmes
- Retraining or re-education support
- Vocational assistance
That’s a big deal because many long claims turn into long claims simply because returning to work is not straightforward.
- Recurrence support: Some policies waive the waiting period if the same or related condition returns within a certain window after you’ve gone back to work. That can make a huge difference if recovery isn’t linear.
Mortgage protection and ACC in NZ
A lot of people assume ACC means they don’t need mortgage protection. ACC can help in many accident-related situations, yes, but it won’t cover everything people fear financially.
ACC is mainly for accidents and certain work-related gradual process conditions
Many illnesses that knock people out of work (like cancer treatment, stroke recovery, or chronic disease flare-ups) don’t fit neatly into “ACC will handle it” expectations
Mortgage protection is designed to cover the broader “I can’t earn” reality, not just injury scenarios.
What does mortgage protection insurance cost in NZ?
The cost depends on:
- Your age
- Health history
- Smoker/non-smoker status
- Occupation risk level
- How much cover you want
- Your waiting period
- Your benefit period
- Any add-ons (like redundancy)
A useful way to think about price is: you’re buying a monthly safety net, and the insurer prices it based on how likely you are to need it and how long they might need to pay it.
Add-ons you can consider (only if they match your real risk)
Redundancy cover
If included, it usually pays a monthly benefit for a limited time (often up to 6 months) if you’re made redundant under specific conditions. It can be valuable, but it’s strict and not automatic.
Specific injury or severe illness extras
Some policies offer additional payments for listed injuries or severe illness definitions. These can add meaningful support during expensive medical periods, but again, definitions matter.
CPI/inflation increases
Some plans let you increase coverage each year without new medical evidence. This helps your cover stay relevant as costs rise, but it increases premiums too.
How do you know if your mortgage protection is “enough”?
Ask these questions like you’re being audited by your future self:
- If my income stopped tomorrow, how many months could I cover mortgage repayments from savings?
- If I were out of work for 6 months, would we fall behind?
- If rates rose and repayments increased, would my current cover still make sense?
- If I could only work part-time after recovery, would a partial benefit matter?
- If your honest answers are uncomfortable, mortgage protection stops being “extra” and starts being “sensible”.
Frequently Asked Questions
Q. Is mortgage protection insurance only for homeowners?
Ans : No. Many policies can also be structured to help cover rent. The purpose is housing payment protection.
Q. When do payments start?
Ans : After your chosen waiting period, once your claim is accepted and you will meet the policy definition (total or partial disability).
Q. Can I claim for mental health?
Ans : Some policies cover mental health-related disability, but it can come with limitations or shorter maximum benefit periods depending on the product.
Q. Will my policy cover pre-existing conditions?
Ans : Sometimes yes, sometimes no. Many policies will exclude pre-existing conditions, apply premium loadings, or request extra medical evidence.
Q. Can I still claim if I go back to work part-time?
Ans : If your policy includes partial disability benefits and you meet the criteria, yes, you may receive a partial payment.
Final thoughts
Mortgage protection insurance isn’t about paranoia. It’s about realism.
Your mortgage doesn’t care if you’re sick, injured, or recovering. It still wants its repayment. This cover is simply a way to protect the most expensive thing you own from the most common life disruption: income stopping unexpectedly.
Ready to get covered? Talk to NZ Insurances today.
