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Income Protection Insurance for the Self-Employed and Contractors in NZ: Quotes by Trade, Costs and How It Works

Compare same-day income protection quotes for five self-employed trades, learn how insurers price the self-employed, and understand the indemnity-versus-agreed-value decision that matters most when your income varies.
Updated 17 September 2026

Guide Overhauled - September 2026: We've rebuilt this guide with same-day quotes from five insurers for five self-employed occupations, a new section on indemnity versus agreed value cover - the decision that matters most when your income varies - and what our research found about whether being self-employed actually costs more. Premiums and offers change constantly, so treat every price here as a starting point and confirm with a live quote.​
Know This First:
  • If you are self-employed, income protection insurance is a way to provide a monthly income if you're unable to work due to sickness or injury. The benefits are designed to help pay for your financial commitments - mortgage or rent, utilities, food and the bills that don't stop when your income does.
  • Income protection replaces your personal income. If your business has fixed costs that continue while you're off work - rent, a lease, staff wages - ask about business overheads cover, a separate policy that pays those for a set period. Many self-employed people need both.
  • Most self-employed people don't have financial protection if they are ill and cannot work, because they rely on their business's income to survive. Employees may have sick leave or an employer's discretion to fall back on; self-employed workers don't.​

To help outline what you need to know before buying a policy, our guide covers:
Important: ACC vs Income Protection Insurance
  1. Many New Zealanders are confused by what ACC covers and whether income protection insurance overlaps. Each provides very different benefits, even if they look similar.
  2. Firstly, ACC only covers injuries; it doesn't cover illnesses. The majority of people absent from work long-term are suffering from an illness, not injuries. ACC's list of covered injuries is published here.
  3. Income Protection Insurance goes further. To make things clear, our ACC vs Income Protection guide outlines what you need to know.
  4. Know This: If you're self-employed, ACC offers CoverPlus Extra (CPX) - you agree a fixed level of accident cover in advance, so if you're injured ACC pays that amount without needing to prove your income at claim time. It's the accident-side version of an agreed value policy, and it's worth reviewing alongside income protection, which covers the illnesses ACC never will. You can confirm current options on ACC's website.

Advertising Disclosure: LifeDirect pays MoneyHub a monthly fee to appear on this page. The fee doesn't change with how many readers get a quote or buy a policy, and we don't receive a commission on any policy sold. No insurer pays to be in our tables or to be shown first. Our advertising policy has the full detail.
Video Explainer
Our friends at LifeDirect explain the unique challenges of income protection for self-employed New Zealanders, including proving income and selecting the appropriate coverage. For more videos, please visit our Income Protection Insurance videos summary guide.
Know This: Get 20% of your first year's premiums back in cash with LifeDirect
  • Take out income protection through LifeDirect, and they'll pay you a one-off lump sum worth 20% of everything you pay in year one.
  • Your policy and premiums stay exactly the same - the cashback is paid on top, straight to your bank account.
  • As an example, an office worker paying $800/year gets $160 back, while a tradie on a $2,500/year policy gets $500 back.
  • You register through your MyLifeDirect login, and it's paid once your policy has been in force for 13 months. LifeDirect's cashback terms and conditions apply - you can find them on their homepage.
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What Determines the Cost of Income Protection Insurance?

Several things are taken into account when buying income protection policies. Below are the primary things that will affect the cost of the premiums you will have to pay:
  1. Age: As with most insurance policies, your age will significantly impact the premiums you will have to pay. As you get older, the probability of illness increases, and as a result, the older you are, the more you are likely to pay for income protection insurance.
  2. Amount of coverage: The amount of coverage you choose plays a significant role in the cost of your premiums. However, most policies are very flexible, allowing you to select a level of coverage that works for your budget but still provides the income replacement you need. The higher the payout you choose, the more expensive the policy will be.
  3. Length of coverage: Similar to choosing the amount of coverage you want, you can decide how long you want the coverage to last. You can typically choose between a short-term policy that covers you for ​1-2 years or one that covers you right up until retirement. As you would expect, the longer the length of the policy, the higher your monthly premiums will be.
  4. Lifestyle Factors: If you are generally healthy and avoid smoking, the cost of your policy will be lower as the insurance companies know that those who live healthy lifestyles are less likely to get sick than those who do not. As a result, those who are healthy may pay lower rates than those who are not.
  5. Job Risks: There are certain types of inherently risky jobs, and anyone with a relatively more dangerous job will typically pay higher premiums. For example, office workers will usually have lower premiums than construction workers, who face a much higher risk of injury​.
  6. Pre-existing health conditions: If you have any significant medical history, the conditions involved will likely be treated as pre-existing by the insurers.​ These pre-existing conditions could prevent you from getting coverage, increase your rates, or be excluded from coverage. The insurance company will review these conditions when you apply for coverage, decide whether to cover those or not and if they do, whether they will increase your premiums because of them.
  7. The deferral period: This is the amount of time you will have to wait before your payments begin. It can be as short as two weeks with some insurers, though four weeks is the most common starting point. This is a critical element of your policy to consider, as you will have to decide how long you can go without income before your income protection policy starts to pay. The shorter the deferral period, the higher the probability you will make a claim. As a result, the policies with the shortest deferral period will cost more.

What's included and excluded from Income Protection Insurance policies?

For self-employed people who choose to buy income protection insurance, the policies are comprehensive and will cover nearly any health issue or injury you might suffer from. There are generally only a few critical exclusions. If you can't work, even if it's caused by something as simple as a broken ankle, your income protection insurance should cover you. However, it is crucial to understand how the insurer defines incapacity in your policy. 

Some things are considered limitations or exclusions for income-protection policies, which are fairly standard on most policies. If these things happen and you try to file a claim, it will likely be rejected. They are those involving or caused by:
  • Illegal drug use
  • Self-harm
  • Alcohol abuse
  • Criminal activity

Video Explainer
Our friends at LifeDirect explain 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. For more videos, please visit our Income Protection Insurance videos summary guide.

How do insurers define incapacity?

There are several definitions that insurance companies use to define incapacity in your policy. It's important to understand that depending on the definition they use, your level of cover can be significantly affected. The three primary definitions from the most comprehensive to the least are as follows:

Own Occupation 
  • This is the best, most comprehensive definition of incapacity and will cover you in most cases. Own occupation means that the policy will pay out if you can't perform your specific job role.
  • As an example, if you're a builder and a back injury stops you working on site, an own-occupation policy keeps paying even if you could physically do a desk job - because a desk job isn't your occupation.
  • You would receive the benefits of the policy for as long as the policy lasts or until you're well enough to go back to your specific position.

Suited Occupation
  • This is a slightly less comprehensive definition than own occupation. Using the same builder example, the insurance company would expect you to return to work if there was another job you could do that was less physical.
  • This could be a significantly different job and could have an impact on your income.
  • As a result, it is essential to understand this definition when you choose a policy. For those with manual or high-risk jobs, this may be the only definition available to you.

Any Occupation or Work Task
  • This is the strictest definition and generally one we do not recommend as being suitable.
  • Simply put, if you're capable of performing any basic task, like walking, bending, hearing, and climbing, you would have to return to work, regardless of whether that means you would be working in a completely different industry or profession.
  • Policies that use this definition of incapacity only protect you from severe illnesses and injuries. They don't provide income protection coverage that many, especially those who are self-employed, need.
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Self-Employed Income Protection Insurance - Pros, Cons and Alternatives

Insurance protection policies solve a problem at a cost. Each insurance company has its own policies so coverages can vary; below is a broad summary of the pros and cons of policies, how they work and what they cover.​

Pros:
  • A policy can cover up to 50-75% of your monthly income.
  • If you trade through a company, insurers can base your cover on salary plus drawings or profit share - check how each insurer assesses income before you apply.
  • You can choose when payments start and can start receiving payments in as little as two weeks.
  • You can purchase a short-term policy or protect yourself right up until retirement.
  • Depending on the specific terms of your policy, you'll receive monthly income replacement until you're well enough to return to work.
  • Income protection policies provide peace of mind that should you ever fall ill and can't work for a (qualifying) reason, your bills would be covered.
  • You wouldn't need to burn through all of your savings.
  • It's a flexible type of insurance and can be configured to your specific requirements.
  • If you're injured, ACC pays first and most policies reduce their benefit by what ACC pays, so the two don't stack - the value of income protection is the illness cover ACC doesn't provide.
  • A policy can provide some much-needed reassurance for those switching from employment to self-employment.
  • Most illnesses and injuries are covered, and there are usually only a few exclusions.

Cons:
  • Cost: Policies are not cheap; our Compare Income Protection Insurance guide shows what 2-year, 5-year and to-65 cover costs at four-week and 13-week waits.
  • Maximum cover: Insurers pay up to 75% of your salary, which may not be enough if your living costs are stretched already.

How is Income Protection Insurance different from Mortgage Repayment Protection Insurance, Critical Illness and Trauma Insurance, or Redundancy Insurance?

Income Protection Insurance is a long-term policy that provides benefits to those with health-related work absence, not redundancy. The policies generally pay for the short term​ (e.g. 2-5 years) or the long term (e.g. until you retire). 

For example, a 35-year-old who has​ an Income Protection Policy and makes a claim could receive a monthly benefit for the next 30-35 years, depending on his retirement age - taxed as income under an indemnity policy, or tax-free under an agreed value policy. 
​
Redundancy insurance and Mortgage repayment protection insurance pay for a limited period - typically months rather than years - while Critical Illness and Trauma Insurance cover pays a one-off lump sum on diagnosis. None of them replaces income through a long illness.

Important:
  • There are many different options you have to choose from when selecting an income replacement policy.
  • If you are self-employed, there are additional considerations you will have to take into account.
  • For this reason, it is important you carefully select the right policy to ensure you and your family have an appropriate financial safety net in place should something happen to you.
​

Who offers Self-Employed Income Protection Insurance and What Does it Cost?

Income Protection Insurance is available for self-employed individuals and contract workers. There are no specific policies for self-employed workers but the costs vary between industries (e.g. self-employed builders will pay more than self-employed real estate agents given the risks). Our pricing samples confirm this below.

When working out a benefit to be paid, your base income may be calculated a little differently. Employed workers base their benefit on their gross annual salary, whereas self-employed workers need to consider their drawings or profits after deduction of trade expenses etc. If you are self-employed and submit a claim, you may need to prove your income.

Income Protection Quotes by Occupation: Paid to Age 65
  • The five self-employed occupations below span the classes insurers use to price income protection. 
  • Every quote is for a 35-year-old non-smoker earning $100,000 with 75% cover of $6,250 a month, a 13-week wait, and benefits paid to age 65. Only the job changes.
  • We chose a 13-week wait because it's what we'd pick for anyone with three months of expenses saved, which is what our emergency fund guide outlines.
  • If you have no savings or sick leave, you'll need a 4-week wait and will pay roughly double. 

We quoted the following jobs, using LifeDirect's own occupation labels (in quotes) so you can select the same one:​

Men, self-employed 3+ years (35, non-smoker, $100,000, 13 weeks, to 65)
  1. Real estate agent - "Real Estate Agent - Salesperson"
  2. Electrician - "Electrician - Qualified/Licensed"
  3. Dairy farmer - "Dairy Farmer/Farm Manager - Supervising employees"
  4. Builder - "Builder - Carpenter/Tradesperson (Qualified)"​
  5. Drainlayer - "Drainlayer"
Occupation AIA Asteron Life Chubb Life Fidelity Life Partners Life
Real estate agent$1,166.05$1,158.31$931.11$876.95Not available
Builder$1,775.48$1,544.88$1,279.18$1,249.06Not available
Electrician$2,542.40$2,121.28$1,807.02$1,624.89Not available
Drainlayer$2,542.40$2,121.28$1,807.02$1,624.89Not available
Dairy farmer$2,542.40$2,121.28$1,807.02$1,624.89Not available
Quotes generated on LifeDirect on 16 September 2026 for a 35-year-old male non-smoker, self-employed for three or more years, earning $100,000, with 75% indemnity cover ($6,250 a month), a 13-week wait period and benefits paid to age 65. Annual premiums including policy fees, before any cashback. Rows run from cheapest to dearest occupation, and the cheapest quote in each row is in bold. Partners Life did not return a quote for any self-employed profile on these settings.

Important: Financial strength - every insurer we compare holds a published financial strength rating in the A range. Our guide to financial strength ratings explains what the grades mean and how to check them.
Know This: Being self-employed didn't itself raise the price at three of the five insurers - the self-employed builder was quoted exactly what an employed mechanic pays. One insurer charged around 20% more for the same occupation class, and one returned no quote for any self-employed profile. What moves the price is the job's risk class: a self-employed real estate agent was quoted $877 to $1,166 a year, while an electrician, drainlayer or dairy farmer was quoted $1,625 to $2,542 - and, unexpectedly, a builder ($1,249 to $1,775) sits a full class below an electrician.

If you have no savings to bridge a 13-week wait, expect to pay roughly double these figures for a four-week wait - our Compare Income Protection Insurance guide shows both.

​Indemnity or agreed value? For the self-employed, this is the decision that matters most

  • An indemnity policy pays a percentage (usually up to 75%) of what you were earning in the year or two before you claim. It's cheaper, and the premiums are tax-deductible, but the payout is taxed as income - and if your income has dipped before you claim, as self-employed income often does, the benefit dips with it.
  • An agreed value policy locks in the monthly benefit when you apply, so a lean year before a claim can't reduce it. Premiums cost more and aren't deductible, but the payout is tax-free. For anyone with variable income, that certainty is usually worth paying for.
  • Either way, keep at least two years of financial statements and tax returns - insurers will ask for them at underwriting, and again at claim time to prove your income.
Know This: Get 20% of your first year's premiums back in cash with LifeDirect
  • Take out income protection through LifeDirect, and they'll pay you a one-off lump sum worth 20% of everything you pay in year one.
  • Your policy and premiums stay exactly the same - the cashback is paid on top, straight to your bank account.
  • As an example, an office worker paying $800/year gets $160 back, while a tradie on a $2,500/year policy gets $500 back.
  • You register through your MyLifeDirect login, and it's paid once your policy has been in force for 13 months. LifeDirect's cashback terms and conditions apply - you can find them on their homepage.
​

Frequently Asked Questions

You'll likely have questions about what cover is right for you - we have answered common questions below to help you understand more about policies, cover and claims. Our Income Protection Insurance videos summary explains more common questions.

Can I pause my income protection coverage if I become unemployed or decide to take a career break?

Some insurance companies offer a 'career break' or 'non-working option', which means that your coverage can be suspended for a certain amount of time. During this time, you will not have to pay your premiums, but you will not be able to make a claim until you decide to restart your policy.

In most cases, you will not have to provide any new information about your health or medical condition to resume the policy. Some insurance companies have an option that allows you to continue the cover at a reduced amount, so you still have some coverage, although a lesser amount, should you become ill during this time. If this feature is of interest to you, you should check to see if your policy includes this before you purchase a policy.

Is there a standard policy that those who are self-employed should choose?

When it comes to income protection, as with most other types of insurance, there are many options that you can choose from. The right policy and coverage for you may be very different from your neighbour's​. When choosing a policy, you'll need to consider your financial situation and choose a policy with benefits right for your unique financial, business, and personal situation.

How much will income protection insurance cost me?

The prices of income protection policies vary between companies and according to the specific benefits you choose. The premiums are calculated based on your required cover level, current health, occupation, your age, smoker status and the length of coverage you require. 

For a 35-year-old non-smoker earning $100,000, our September 2026 quotes above ranged from $877 a year for a self-employed real estate agent to $2,542 for an electrician - the table shows where your trade sits.​

What happens if I change jobs?

Occupation is a rating factor, so tell your insurer if your job changes - particularly if you move from office work to a manual or higher-risk trade, which can change your premium or your policy's terms. If your income changes, review your cover amount too.

Can I cancel an Income Protection Insurance policy?

Yes, at any time. Cancel within the cooling-off period, usually 15 to 30 days from the start of the policy (check your policy document), and you'll get a full refund of premiums paid. After that you can still cancel whenever you like, but premiums already paid aren't refunded, and restarting cover later means new underwriting at your age and health at that time.
​

Income Protection Insurance for the Self-Employed - Our View and Conclusion

  • Self-employment can be flexible, but it is also costly and financially risky. Having a fall-back policy to cover an agreed amount of your income should you fall ill is helpful, but it is also another ongoing bill.
  • Many New Zealanders are confused by what ACC covers and whether income protection insurance overlaps. ACC only covers injuries; it doesn't cover illnesses, whereas Income Protection Insurance goes further (our ACC vs Income Protection guide outlines what you need to know should you need further guidance).
  • If you have large ongoing payments falling due (e.g. mortgage repayments, young children and other big-ticket expenses), protecting yourself from the risk that you get seriously ill is worth considering.
  • What's right for you comes down to what you can afford. If you struggle to build or maintain an emergency fund, a policy could be an effective way to protect your family from hardship.
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