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Income Protection Insurance Explained - Eight Must-Watch Videos to Help You Understand What's Right For You

​We share eight essential videos explaining income protection in plain English. We explain how it works, what ACC won't cover, wait periods and protecting your lifestyle in our must-watch videos
Updated 27 July 2025

Summary
  • Understanding income protection can be the difference between financial security and hardship if illness or injury prevents you from working. With ACC only covering accidents, not illnesses, and limited sick leave entitlements, more New Zealanders are recognising the gap in their financial safety net. A popular post on Reddit in July 2025 highlighted the confusion around government entitlements and benefits (or lack of) when someone gets cancer or another long-term illness and can't work. 
  • But how do you know if income protection insurance is worth it, what level of cover makes sense, and how do you balance premiums with adequate protection?
  • Our comprehensive income protection comparison outlines what you need to know with estimated costs. Additionally, we have collaborated with LifeDirect's insurance adviser and expert, Steven Hillary, to share eight must-watch videos.
  • Steven has spent years helping New Zealanders navigate the complex world of insurance. As an experienced adviser, he has witnessed the devastating financial impact on people who cannot work due to illness, and the relief that proper income protection provides.
  • The videos LifeDirect shares with MoneyHub below help you understand this crucial coverage by explaining exactly how income protection works in New Zealand.

Our guide covers:
Why We Created Our Video Explainers
At MoneyHub, we believe everyone deserves access to clear, unbiased financial guidance. We work with LifeDirect, who provide a transparent way to buy income protection insurance, and have published these videos in an easy-to-digest video format for many reasons:
  • Visual learning works: Complex insurance concepts are easier to understand when explained visually
  • Time is precious: Each video is under 3 minutes, designed to respect your busy schedule
  • Real expertise matters: Steven brings years of practical experience helping real New Zealanders
  • No jargon: Everything is explained in plain English, that makes sense

What You'll Learn
This carefully curated playlist takes you through everything you need to know about income protection insurance in New Zealand. We've organised the videos in a logical sequence that builds your knowledge step-by-step:
  • What income protection covers (in most cases, it's what ACC doesn't cover, which is a lot)
  • How to determine the right amount and duration of cover
  • Understanding wait periods and their impact on premiums
  • Special considerations for self-employed New Zealanders
  • Making successful claims when you need them

Why Watch All the Videos?
While each video stands alone, watching the complete series in the order below provides a comprehensive understanding that can help protect your lifestyle and your family's financial security. We view it as a valuable consultation with an insurance expert, which allows you to watch at your own pace, rewind the tricky bits, and share with family members who depend on your income.
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How to Use This Guide
  1. Start at the beginning: The videos are ordered to build your knowledge progressively
  2. Take notes: Jot down questions or points relevant to your situation
  3. Share with family: These decisions often affect loved ones too
  4. Come back anytime: Bookmark this page for when you're ready to make decisions

Video Guides - Income Protection Insurance Explained

Our eight-part video series breaks down complex income protection insurance topics into digestible, practical advice. Each video is designed to answer the questions that matter most to New Zealanders considering taking out income protection insurance. From understanding basic coverage to selecting the right wait period, LifeDirect's trusted adviser Steven Hillary guides you through every essential aspect.

Part 1: Making the Decision

What Does Income Protection Cover? - 0:48

Start here. Steven explains exactly what income protection covers, focusing on the crucial gap between ACC (which only covers accidents) and the reality that most time off work is due to illness. This foundation video helps you understand why income protection matters.

More details: Income Protection Insurance vs ACC

ACC Won't Cover This: What Income Protection Is Really For - 1:12

It's critical to understand the ACC gap. Steven breaks down real-life scenarios where ACC provides no coverage, ranging from cancer to mental health conditions, illustrating exactly when income protection becomes your financial lifeline.

Part 2: Critical Considerations

How Long Does Income Protection Pay You For? - 0:49

​This affects both your coverage and premiums. Steven reveals the different benefit periods available, from two years to age 65, helping you balance comprehensive protection with affordable premiums.

How Much Income Can You Actually Insure? - 0:35

If you're wondering about coverage limits, this video is essential. Steven explains the percentage of income that can be protected, how insurers calculate this, and what constitutes insurable income.

Can You Get Insurance with a Pre-Existing Condition? - 1:16

​If you have existing health conditions, don't skip this. Steven explains your options, what insurers assess, and strategies for getting income protection even with pre-existing conditions.

Part 3: Understanding Costs & Making It Work

What's a Wait Period in Income Protection? (And How to Choose One) - 1:12

​Master the balance between premiums and protection. Steven breaks down how wait periods work, from 2 weeks to 3 months, and how choosing the right one can significantly reduce your premiums.

Self-Employed? Here's How to Protect Your Income in New Zealand - 1:19

​A must-watch for business owners and contractors, Steven addresses the unique challenges of income protection for self-employed New Zealanders, including proving income and selecting the appropriate coverage.
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More details: Income Protection Insurance for Self-Employed

Do I Still Need Income Protection if I Have Savings or Sick Leave? - 0:36

When savings aren't enough, you need this perspective. Steven walks through why even those with emergency funds and generous sick leave still benefit from income protection, especially for longer-term disabilities.

Comparing and Buying Income Protection Insurance - Next Steps

Ready to Compare Policies?
  • Use our comprehensive income protection insurance comparison guide to see real prices from New Zealand's leading insurers. Get instant quotes tailored to your occupation, income level, and preferred wait period.

Need Personalised Advice?
Take Action and Make a Decision
If you're still unsure how to proceed, we suggest the following:
  1. Today: Watch the videos and take notes on your key concerns
  2. Tomorrow: Get three to five quotes using LifeDirect's comparison tool
  3. Day 3: Book a consultation if you have specific questions - you will also need to check your current sick leave entitlements, review any existing ACC coverage, calculate your essential monthly expenses, and discuss protection needs with your partner or family

Our View: Income protection is your financial safety net when illness strikes - something ACC simply doesn't cover. The best policy balances adequate monthly benefits with a wait period you can manage, all at a premium that doesn't strain your budget. Remember, most time off work is due to illness, not accidents, making income protection an essential part of your financial plan.

Frequently Asked Questions

These videos offer general guidance, but we recognise that everyone's situation is unique. We have listed common queries below, but if you'd like personalised advice tailored to your specific circumstances, you can contact the team at LifeDirect.

I already have ACC coverage through my work. Why would I need income protection?

​ACC only covers accidents, not illnesses. Since approximately almost all long-term work absences are due to illness (cancer, heart conditions, mental health issues, chronic diseases), ACC leaves a massive gap in your financial protection. Income protection fills this critical gap, ensuring you're covered whether you can't work due to a skiing accident or a cancer diagnosis. Our guide to ACC vs Income Protection Insurance explains more.

How is income protection different from my employer's sick leave?

​Sick leave typically provides 10-20 days per year, which is helpful for flu or minor surgery, but inadequate for serious conditions that require months of recovery. Income protection kicks in after your sick leave exhausts (based on your chosen wait period) and can continue paying up to 75% of your income for years, or even until retirement age. It's the difference between short-term support and genuine financial security.

I'm self-employed with variable income. Can I still get income protection?

​Yes - Steven specifically addresses this in this video. Most insurers will cover self-employed individuals based on your average income over the past 1-2 years. You'll need to provide financial records (tax returns, accounts), and some insurers offer "agreed value" policies that lock in your benefit amount regardless of income fluctuations at claim time.

More details: Income Protection Insurance for Self-Employed

Will these videos try to sell me LifeDirect's services?

No - these are purely educational videos designed to help you understand income protection insurance concepts. While Steven works for LifeDirect, the videos focus on universal principles that apply regardless of which adviser or insurer you choose. There's no sales pitch or pressure to use any particular service.

What exactly counts as being "unable to work" for a claim?

This depends on your policy type. "Own occupation" coverage pays if you can't perform YOUR specific job, while "any occupation" only pays if you can't do and suitable work. Most quality policies offer "own occupation" for at least the first two years. The videos explain these crucial differences and why occupation-specific coverage matters.

Will having a history of depression or anxiety prevent me from getting coverage?

Not necessarily. While mental health history requires disclosure and may affect your premiums or exclusions, many people with managed mental health conditions successfully obtain income protection. Steven's video on pre-existing conditions explains strategies for obtaining coverage and what insurers consider when reviewing a mental health history.

How quickly can I claim after starting a policy?

Most policies have a stand-down period for pre-existing conditions (typically 12 months), but you can claim immediately for new conditions or accidents that occur after your policy starts. However, your chosen wait period (2 weeks to 3 months) always applies before benefits begin - this is different from health insurance and often confuses.

Is income protection worth it if I have $50,000 in savings?

Steven addresses this directly in this video. While $50,000 sounds substantial, consider this: if your monthly expenses are $5,000, that's only 10 months of coverage. A serious illness like cancer often involves 12-24 months away from work. Income protection preserves your savings for actual emergencies while providing ongoing monthly support during extended recovery periods.

What happens to my premiums as I get older?

Unlike life insurance with level premiums, most income protection policies have stepped premiums that increase with age. This reflects the higher likelihood of illness as we age. Some insurers offer level premium options (higher initial cost, but stable over time) - the videos help you understand which structure suits your situation and budget.

Can I reduce my premiums without losing coverage?

Yes - several strategies exist. Extending your wait period from 4 weeks to 13 weeks can result in a 30-40% reduction in premiums. Choosing a shorter benefit period (2 years vs. to age 65) also reduces costs. Steven's video on wait periods explains how to find the sweet spot between affordable premiums and adequate protection.

What if I return to work part-time during recovery?

Quality income protection policies include partial disability benefits. If you can only work reduced hours or in a lower-paying role during recovery, your insurance pays the difference between your reduced earnings and your previous income (up to your insured percentage). This encourages a gradual return to work without a financial penalty.​

Do I need to keep paying premiums while I am claiming due to an illness?

Most policies include a "premium waiver" benefit, meaning you don't pay premiums while receiving income protection payments. This prevents the additional financial stress of maintaining insurance costs while your income is already reduced.

How do income protection payments affect my tax?

Income protection benefits are generally tax-free if you pay the premiums personally. However, if your employer pays your premiums as a fringe benefit, the payments may be subject to taxation. This is a crucial consideration when structuring your coverage, particularly for business owners. An adviser can let you know what's best for your situation.

What's the catch? This sounds too good to be true - what do I need to know?

The main "catches" are clearly explained in the videos: premiums increase with age, pre-existing conditions may be excluded, there's always a wait period before benefits start, and you typically can't insure 100% of your income (usually 75% maximum). Understanding these limitations upfront helps you make an informed decision rather than discovering surprises at claim time.
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