How to compare income protection across insurers

Income protection replaces a proportion of your earnings while illness or injury stops you working. For most working New Zealand households it is the cover that matters most, because the income pays for everything else including the premiums on the other policies.

It is also where the gap between what people think they bought and what the policy pays is widest. That gap is almost always created by one of three clauses: the definition of disability, the offset provision, and how income is assessed at claim under an indemnity contract.

Comparing insurers here is not a price exercise. Two policies quoting the same monthly benefit for the same waiting period can produce very different money at claim, and the cheaper is frequently the one that offsets harder.

Ask each of these of every insurer, and ask for a worked example rather than a description.

1. 1Agreed value or indemnity? Agreed value fixes the benefit at application on the income evidence you supply then. Indemnity assesses income at claim, which is a problem for anyone whose earnings fluctuate. Agreed value is not universally available and availability has narrowed, so ask specifically.
2. 2Which waiting periods are offered, and when does the clock start — when you stop work, or at diagnosis? Four, eight, thirteen, twenty-six and 104 weeks are common. Ask whether a brief return to work restarts it.
3. 3Which benefit periods are offered? Two years, five years, to 65 and to 70 are the usual options, and they are different products. Two years is affordable and covers most claims by count; to 65 covers the claims that ruin households.
4. 4How does the offset clause work, and specifically how does it treat ACC weekly compensation? Ask whether the offset applies dollar for dollar, whether it applies to other insurance, sick leave and employer payments, and whether there is an offset-free threshold.
5. 5Is there a booster or top-up benefit that lifts your combined income back toward the full benefit when ACC is paying part of it? Not every insurer offers one, and where they do, the mechanics and the caps differ.
6. 6How is partial disability measured — by hours, by duties, or by income? This decides what happens when you return at reduced capacity, which is how most long claims end.

Then the structural questions

• Occupation class: which class you have been assigned, and whether it restricts the benefit and waiting periods available to you.
• Whether the policy is guaranteed renewable, and whether level premiums are available on income protection at all.
• How the policy treats a career change, parental leave or a period of unemployment after it starts.

These are the details that decide whether the cover does what you expected. Read them before you compare on price.

• Whether the quote is agreed value or indemnity — the price difference is large and the claim difference is larger.
• Whether the benefit is taxable and the premium deductible, which differs by policy type and changes the amount you should insure.
• Whether the waiting period you chose is affordable against your actual savings, since you fund yourself through it.
• How the wording defines disability — inability to perform your own occupation, or any occupation you are suited to.
• Whether a return-to-work at reduced hours triggers a partial benefit or ends the claim.
• Whether the policy expires at 65 or 70, and what that means if you intend to work longer.

Every New Zealand insurer writes income protection to its own wording, and the words are where the money is. Two policies that look identical on price can pay very differently when it matters. Closing that gap is the entire job of an adviser.

• Offset clauses are the most technical wording in the personal risk suite and are almost never summarised accurately in marketing material.
• Occupation class definitions differ between insurers, so the same job can be classed differently — and availability follows class.
• An adviser models the ACC interaction so you do not buy cover ACC already provides.
• Where agreed value is unavailable for your income type, an adviser can find an insurer that will write it or structure around the gap.
• Income protection claims are assessed repeatedly over months or years. An adviser manages that process rather than leaving you to.

There are three ways to buy life cover in New Zealand, and they are not equivalent. You can buy direct from one insurer, which means you see one product range and one underwriting appetite. You can buy through your bank, which usually means a single insurer’s product sold under the bank’s brand, often with narrower definitions. Or you can go through an adviser, who quotes several insurers at once and is required to put your interests first.

The premium you pay is the same either way. Insurers build adviser commission into their pricing whether or not an adviser is involved, so going direct does not get you a discount — it just removes the person whose job is to argue your corner at application and at claim time.

• An adviser can see which insurer is currently taking your health history on standard terms, and which one will load or exclude it.
• An adviser can structure cover across two insurers if that produces a better outcome than putting everything with one.
• An adviser handles the underwriting back-and-forth, and is the person who chases the claim when a family is least able to.
• An adviser has to document why the recommendation suits you, which is a written record you can hold them to.

We are a referral service, not an insurer. We do not quote premiums and we do not sell policies. What we do is put you in front of one licensed New Zealand adviser who can compare the market properly.

1. 1

   You tell us what you are looking at

   The form takes about a minute. Nobody asks for your medical history on a web form — that conversation happens with the adviser, properly, and only once you have decided to proceed.

2. 2

   An adviser calls you

   A licensed New Zealand adviser talks through your situation: who depends on you, what you owe, what you already have in place, and what you are actually worried about.

3. 3

   They compare the market

   The adviser quotes across the major insurers, checks which of them will take your health history on the best terms, and puts the options side by side in writing.

4. 4

   You decide, in your own time

   There is no obligation and no cost to you. If the answer is that you already have enough cover, a good adviser will tell you that.