How Long Does Income Protection Pay You For?

Life can be unpredictable, and a sudden illness or injury can disrupt your income. For Kiwi, whether in busy Auckland or rural South Island, income protection insurance offers peace of mind by replacing up to 75% of lost earnings during disability. But how long do payouts last? It depends on your chosen benefit period, ranging from 1-2 years to age 70, letting you tailor coverage to your lifestyle and goals. In New Zealand, where ACC covers accidents but not illnesses - which cause most long-term absences - this insurance fills critical gaps, helping with mortgages, school fees, or business costs.

Payout duration affects premiums and planning. Shorter periods suit those with savings, while longer ones protect families or those nearing retirement. With recent rising costs and healthcare delays, extended coverage avoids reliance on savings, Work and Income benefits or even Give A Little pages.

Key Factors Influencing Payout Length in New Zealand

The benefit period is the maximum timeframe for receiving monthly payments, these payments are typically up to 75% of your pre-disability gross income, with caps like $30,000 per month from some providers. Common options include:

• 1-2 Years: These short-term benefit periods are cost-effective, with lower premiums, and are suitable for temporary disabilities. They're popular among self-employed contractors who might recover quickly from injuries.
• 5 Years: A middle-ground choice, offering substantial protection without excessive costs. Ideal for anyone where a prolonged absence could strain finances.
• To Age 65 or 70: Long-term coverage that continues until retirement age, providing comprehensive security. This is especially valuable in high-risk occupations.

Other influences include your occupation - manual laborers might opt for longer periods due to higher injury risks - and policy add-ons like inflation protection, which adjusts benefits to match NZ's CPI. Payments cease if you return to work, even partially, or if offsets from ACC or other sources apply.

Pros and Cons of Different Benefit Periods

Choosing shorter periods can save 20-30% on premiums, but risks gaps in long-term scenarios.

Common FAQs on Income Protection Payout Durations in NZ

1. What if my disability lasts beyond the period? Your payments stop and you would need to rely on other forms of funding.
2. Can I extend the period later? Yes, but it may involve health reassessments (underwriting) and higher costs.
3. How does it interact with ACC? Income protection covers illnesses; ACC handles accidents, with offsets to prevent double-dipping.
4. Are benefits taxable? Generally tax-free if premiums are paid personally.
5. What's the maximum payout? Up to 75% of income, with provider-specific caps.
6. Do policies cover mental health? Yes, increasingly so in NZ, with no discrimination. Aside from pre-existing.
7. Can expats get coverage? Many policies apply worldwide, but check residency requirements. And must be obtained whilst in New Zealand.

Income protection gives you the flexibility to choose a payout period that fits your life - whether it’s a couple of years or right through to retirement. It’s all about finding the cover that keeps you secure when life throws a curveball. At LifeDirect, we make it easy to compare trusted NZ insurers, so you can find the right policy without the hassle. Ready to protect your future? Grab your free quote today and take the first step toward peace of mind!

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 independent guidance.