Income protection in a nutshell

As the name suggests, income protection insurance is designed to replace a portion of your income if you’re unable to work due to illness or injury.

Policies typically cover up to 75% of your pre-tax income for an agreed period – i.e. two years, five years, or until age 65 or 70. Payments start after a set waiting period, which can range from two weeks to up to two years, depending on your insurer.

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Tailoring your policy to your budget

Thinking about affordability? Income protection is often more accessible than people assume. You can tailor your policy to fit different budgets and needs by:

• Adjusting the waiting period – The waiting period is the time before your first payout after a claim. So, ask yourself: if your income stopped today, how long would your emergency savings last? Choosing a longer waiting period can reduce your premiums, while a shorter one provides quicker financial support.
• Choosing an appropriate payment period – This is the length of time you’ll receive payouts. While some prefer coverage that lasts until retirement, opting for a shorter period, like two years, can significantly lower premiums. There’s no “right” choice—just what suits your needs best.
• Adjusting the coverage amount – Full coverage (75% of your pre-tax income) isn’t always necessary. You may find that covering 60% of your income is enough to meet essential expenses, which can help keep premiums lower.

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ACC vs income protection

Now, where does ACC fit in? ACC covers accident-related injuries, not illnesses. If you’re unable to work due to a long-term illness, income protection fills that gap, potentially creating a more complete safety net alongside ACC.

It’s also important to note that ACC regularly assesses your ability to return to work—any work, not necessarily your previous job. With income protection, you have more control over the payment period and amount, making it a flexible option tailored to your needs.

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When is income protection worth exploring?

Income protection isn’t a one-size-fits-all solution, but here are some scenarios where it can be particularly beneficial:

• Primary earners – If you’re the main income source in your household, your earnings are crucial to meeting family expenses. Income protection can help maintain that security.
• Self-employed – Without employer-paid sick leave, self-employed people are especially vulnerable to income loss due to illness or injury. Income protection can provide a much-needed financial buffer.
• People with big financial commitments – Homeowners, parents, and those with significant financial responsibilities can benefit from the safety net income protection provides.

These are just a few examples. Whether income protection is right for you depends on your unique circumstances, and this is where an Insurance Link adviser can help.

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Get in touch: we can help

Thinking of getting income protection? Perhaps you’re just exploring your options? Talking to an Insurance Link adviser can make all the difference.

We can help tailor your policy to match your income, expenses, and risk tolerance, ensuring it aligns with your priorities. We’ll also make sure you fully understand your policy, including any additional benefits like rehabilitation support. Plus, as your income, expenses, or family situation changes, we’ll work with you to review your coverage and keep it relevant to your needs.

Weighing up your options? Don’t hesitate to contact us.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek financial advice.

A full disclosure statement for each Insurance Link Adviser is available on request and free of charge.