Income protection waiting periods

The waiting period — sometimes called the stand-down or elimination period — is the number of weeks you must be unable to work before the benefit starts accruing. Nothing is paid for that time. It is the excess on the policy, expressed in weeks rather than dollars.

It has an outsized effect on price. Most short-term disability resolves quickly, so the first few weeks of cover are the most expensive part of the risk. Moving from a four-week waiting period to thirteen weeks removes the claims the insurer expects to pay most often, and the premium falls accordingly.

The right choice is a cash flow question, not an insurance question. Add up your sick leave, your annual leave, your accessible savings and what a partner earns. Work out how many weeks that would carry the household. Then pick the waiting period that starts where your own resources stop.

Almost every income protection policy pays monthly in arrears. That means on a 13-week waiting period, the benefit accrues from week 14 and the first payment arrives at the end of week 17 — roughly four months after your income stopped.

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

• Whether the policy pays monthly in arrears, and whether earlier or part-month payments are possible.
• How the waiting period is measured — from the date you stop work, or from the date of diagnosis.
• Whether returning to work briefly during the waiting period restarts it, and how long a return is allowed.
• Whether the waiting period is waived or shortened for specified severe conditions.
• How the waiting period aligns with your employer sick leave entitlement.
• How it aligns with the waiver of premium waiting period on your other policies.

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.

• The premium difference between waiting periods is large and insurer-specific — worth pricing all four rather than assuming.
• Rules on returning to work during the waiting period differ, which matters for anyone attempting a graduated return.
• Aligning the income protection waiting period with the waiver of premium waiting period on the same plan is a simple fix that is often missed.
• For an employee with generous sick leave, a long waiting period can make to-age-65 cover affordable where it otherwise would not be.

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.