Offsets and clawbacks

An income protection policy is not a bet that pays out on an event. It is a contract to replace income you have lost, and the insurer will not pay you twice for the same loss. Offset clauses are how that principle is enforced: other income you receive because of the disability is deducted from the benefit before it is paid.

In New Zealand the offset that matters most is ACC. If your disability results from an accident, ACC may pay weekly compensation of up to 80% of your pre-injury earnings. An income protection policy capped at 75% and offset against ACC will then pay very little — sometimes nothing at all. The same person, with the same disability caused by an illness instead, receives no ACC and the full insurer benefit.

None of that is hidden. It is written into the policy from the first day. But it is regularly not explained at the point of sale, and the moment people discover it is usually the moment they most needed the money.

Clawbacks

A clawback happens when a payment arrives late and covers a period the insurer has already paid for. ACC decisions are the usual cause: a claim is initially declined, the insurer pays, ACC later accepts the claim and backdates weekly compensation, and the insurer is entitled to recover what it paid for the overlapping period. The money is genuinely owed back, and it is far less painful if you were told to expect it.

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

• Exactly which payments the policy offsets, and whether the offset is dollar for dollar or partial.
• Whether ACC is offset against the whole benefit or only against a portion of it.
• Whether the policy is designed as a top-up alongside ACC, which changes both the price and the outcome.
• How sick leave and employer payments are treated during the waiting period and during the claim.
• The insurer’s right to recover overpayments if a backdated payment arrives.
• Whether you are required to apply for ACC or other entitlements as a condition of the claim.

Every New Zealand insurer writes income protection in new zealand 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 among the largest real differences between New Zealand income protection products and almost never appear in a price comparison.
• Some insurers offer ACC top-up structures that price the cover on the assumption ACC pays first — cheaper, and honest about what you are buying.
• For self-employed people, the interaction with ACC CoverPlus Extra is worth structuring deliberately rather than by accident.
• An adviser can model the benefit under both an accident and an illness scenario, which is the comparison that matters.

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.