Income protection insurance can save you and your business if you’re sick or injured and unable to work.


When it comes to income protection, many New Zealanders think that the Accident Compensation Corporation (ACC) will cover them – and, in a lot of cases, it does.

However, ACC only offers coverage for loss of earnings if you’ve been injured in an accident. It doesn’t cover:

  • illness
  • degeneration
  • preexisting conditions.

Kiwis who are unaware of this reality often overlook the need to take out insurance to protect their income and their business. For those running businesses, this can be a costly oversight and contribute to further stress in the unfortunate event of an illness.

This article is for general information purposes and is not intended as insurance advice.

Options for income protection insurance

There are three main types of insurance that New Zealanders can use to cover themselves for illness or injury:

  • Income protection insurance
  • Mortgage protection insurance
  • Key person insurance

Let’s take a closer look at these options…

Income protection insurance

Income protection falls into three categories:

  • Indemnity
  • Loss of earnings
  • Agreed value

Each of these insurances have different characteristics and limitations but essentially these categories are in place to insure your specified level of income. These insurance policies are subject to offsets from other income earned, including any ACC payments. Should offsets apply, your payout would be reduced.

Mortgage protection

Mortgage protection insurance is an agreed monthly benefit payment. You can do one of two things with mortgage income:

1. You can insure at 110% of the contractual mortgage repayments; or

2. You can insure 40% of your income.

There are no offsets that get deducted from this insurance at payout time.

Key persons Insurance

Key person insurance is available to insure someone who is essential to your business. That person could be you, a business partner or an important employee. Generally, if a key person is unable to work due to illness or injury, it has a detrimental effect on the performance of the business.

The intention of this insurance is to provide the business with a regular payment to either replace some of the lost income, hire someone to step into the key persons shoes, or simply to keep operating the business. This helps ensure business continuity at a stressful time.

Key person insurance is an agreed value insurance which does not have any applicable offsets at payout time.

Deciding what’s right for you

Insurance is about mitigating risk. Your ability to mitigate your loss of income needs to be considered when assessing your needs in terms of protecting your income. This also needs be considered when assessing the need for key person insurance in your business.

It can be tough to navigate these decisions. That’s why working with an insurance broker who specialises in personal risk management and business continuity is essential when you’re working out what you should or shouldn’t insure.