The monthly benefit you could insure.
Monthly benefit
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Annual cover
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Your breakdown
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The gap ACC leaves wide open
New Zealanders have a quiet blind spot about income protection because ACC feels like it has them covered. It does not, and the distinction is the single most important thing on this page. ACC pays weekly compensation, usually around 80 percent of your income, if you cannot work because of an accident or injury. But ACC does not cover illness. A heart condition, cancer, a back problem that is degenerative rather than from a specific accident, a mental health breakdown, none of these trigger ACC. Yet illness is statistically far more likely to stop you working for an extended period than an accident is. Income protection insurance fills precisely that hole, paying a monthly benefit if sickness or injury keeps you off work. This calculator sizes that benefit.
The tool is for anyone whose lifestyle depends on their ability to keep earning: mortgage holders, single-income households, the self-employed who have no sick leave to fall back on, and high earners whose outgoings have scaled with their pay.
Why cover tops out around 75 percent
Insurers cap income protection at a percentage of your gross income, commonly up to 75 percent. The reason is deliberate: if a policy paid 100 percent, there would be little financial reason to return to work, so the cap preserves the incentive to recover and get back to it. The calculator multiplies your gross annual income by the cover percentage you choose, then divides by twelve to give the monthly benefit. You set the percentage because not everyone needs the maximum. If you have a partner still earning, or a strong emergency fund, you might insure a lower share and pay a smaller premium.
An $85,000 earner insuring 75 percent
Take someone on $85,000 gross who wants the maximum 75 percent cover. The benefit comes out like this.
So if illness stopped them working, the policy would pay about $5,313 a month after the wait period. The chart shows the insured 75 percent against the 25 percent of income the policy deliberately leaves uncovered.
Wait periods, payment periods, and tax
Two levers move the premium more than anything else. The wait period is how long you must be off work before payments start, often four, eight, thirteen or twenty-six weeks; a longer wait means a cheaper premium but more reliance on your own savings up front. The payment period is how long the benefit keeps paying, from two years through to age 65; longer cover costs more but protects against a career-ending condition. There is a tax point that catches people out, in a good way: income protection premiums are generally tax-deductible, and because of that the benefit you receive is taxable as income. So the gross monthly figure this tool shows is before tax, just like a salary, and you will pay PAYE-style tax on it at your marginal rate when it pays out.
A practical recommendation from advising on this: match your wait period to your emergency fund. If you hold three months of expenses in cash, a 13 week wait period is sensible and trims the premium meaningfully. Paying for a four week wait when you have ample savings is money wasted.
Is income protection different from mortgage protection?
Yes. Income protection replaces a share of your whole income, so you can cover all your living costs, not just one debt. Mortgage protection is narrower and pays out toward your home loan specifically. Income protection is the more flexible cover because the money is yours to allocate across rent or mortgage, food, power and everything else while you recover.
Do I still need it if I have good sick leave?
Statutory sick leave and any employer top-up help in the first weeks, but they run out fast, often within a couple of months. Income protection is built for the long absence, the six months or two years that sick leave was never designed to cover. The self-employed, who have no sick leave at all, have the strongest case of anyone for holding it.