Insurance for contractors

Contractors tend to be well paid and badly covered. The day rate is higher than the equivalent salary precisely because it excludes annual leave, sick leave, employer KiwiSaver contributions and any group insurance the client’s permanent staff receive. The premium for taking that risk is in your rate; whether you convert any of it into actual protection is a decision most contractors never consciously make.

The critical distinction is between not working and not being able to work. Income protection insures the second. If your contract ends, the market softens, or the client restructures, that is not a disability and no income protection policy in New Zealand will pay for it. What it does cover is illness or injury that prevents you performing your occupation, and for a contractor that is the event that turns a good year into a crisis.

The complication is the shape of your income. Contract work is often intense and interrupted — six months on, two months looking, a rate that changes with each engagement. Insurers assess income over a period, and how they treat the gaps decides how much cover you can buy and what a claim will pay.

Every insurer defines insurable income for a contractor slightly differently. These are the questions that decide your number.

• Is income measured over the last twelve months, or the best twelve of the last twenty-four? The second is far kinder to a contractor.
• Are between-contract periods averaged into your income, or excluded as non-working time?
• Does the insurer look at your invoiced income, your company’s profit, or the drawings you actually take?
• If you contract through a company, do retained earnings count as your income for cover purposes?
• Are legitimate business expenses deducted before the insurable income is calculated?

Agreed value where you can get it

For lumpy income, cover assessed at application rather than at claim removes the argument that hurts contractors most: a claim arriving in a thin year. Where agreed value cover is available it is worth the extra premium for exactly this reason. Where it is not, ask precisely how the indemnity calculation would work on your last three years and get the answer in writing.

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

• Your ACC classification unit and levy rate — misclassification is common and costs money in both directions.
• Whether ACC CoverPlus Extra suits you better than the default earnings-based calculation.
• Whether the policy has a waiting period you can genuinely fund from savings between engagements.
• Whether the policy defines your occupation by the work you do or by your contract status, which affects the disability test.
• Whether the benefit period runs to age 65 or stops at two or five years — the short options look cheap and fail exactly when a claim is serious.
• Whether you hold life cover to clear a mortgage that a high but irregular income has been servicing.

Every New Zealand insurer writes income protection for contractors 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.

• Finding the insurer whose income definition fits your invoicing pattern, which can change your maximum benefit substantially.
• Matching ACC settings to private cover so the accident and illness sides are both properly funded.
• Assessing whether the client’s group scheme, if you are inside one, actually covers contractors — often it does not.
• Getting occupation class right, since contractors doing physical work are frequently rated on the wrong basis.

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.