TPD vs income protection

Income protection is a replacement-of-earnings product. After a waiting period — commonly four, eight or thirteen weeks — it pays a monthly benefit, typically up to about 75% of your pre-disability income, for as long as you remain unable to work up to the end of the benefit period. If you recover and return to work, it stops. It responds to a broken leg, a serious illness with a two-year recovery, and everything in between.

TPD is a capital product. It pays once, and only when it is accepted that you will not work again, assessed against the occupation definition in your policy. There is no requirement to have suffered income loss and no ongoing test after the payment is made.

The difference in claim frequency is what should drive the decision. Most disabilities are temporary. Far more New Zealanders will spend six months unable to work than will be permanently and totally disabled. Income protection covers the common case; TPD covers the rare and catastrophic one.

A household that holds both is well protected: income protection carries the mortgage and groceries through the months or years of illness, and if the outcome turns out to be permanent, TPD clears the debt so the monthly obligation disappears. A household that holds only TPD is exposed to every disability that is serious but not permanent — which is most of them.

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

• Whether your income protection benefit period runs to age 65 or only for two or five years, since a short benefit period leaves the permanent case uncovered.
• How ACC offsets apply to your income protection, since accident-caused disability may produce little insurer benefit.
• Whether your TPD uses an own occupation or any occupation definition, which changes the odds of a claim succeeding.
• Whether TPD is accelerated against life cover, and what that leaves for a family.
• The tax treatment of each, which differs and depends on structure and ownership.
• Waiting periods on both — TPD usually has one too, and it is often longer than people expect.

Every New Zealand insurer writes tpd insurance 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 interaction between ACC, income protection and TPD is where advice matters most in New Zealand, and it is almost absent from overseas material.
• An adviser can structure a long waiting period with a to-65 benefit period, which often makes income protection affordable where it seemed not to be.
• Where TPD is the only affordable disability cover, an adviser can at least ensure the definition and expiry age suit the occupation.
• Business owners frequently need business expenses cover alongside personal income protection, which is a separate product again.

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.