Why having Income Protection is important
Thu Mar 19 2026
With the cost of living affecting many, and now the increase in fuel prices adding to the problem for most of us and many businesses, it’s understandable for individuals to question their personal insurance covers, with clients often asking whether they should retain, reduce or cancel their covers to reduce their premium costs.
However, Income Protection insurance specifically, is vital to keep as it protects our income should we be unable to work through injury or illness. Of course we are fortunate to have ACC here in New Zealand, however, to rely on this is extremely unwise, as that provides support in the event of injury, NOT illness!
Income Protection cover pays a monthly amount when we cannot work but still have bills to pay – mortgage, utilities, groceries, child school fees…………without an income how will you be able to pay for these things. Sick pay is usually around 10 days, and you may be able to use holiday leave, however, beyond those days, what will you do for an income?
Whilst it’s easy to say “it’ll never happen to me”, we only have to look at claims statistics of how much insurance companies are paying out for people unable to work and claiming on Income Protection covers. We all know people who have suffered an injury or illness that prevents them from working for a time, so we must be honest with ourselves and say “it could happen to me.”
We’ve shared here a link to an article by MoneyHub about this specific issue, showing claims statistics for 12 months to February 2026 from Life Direct Claims and Industry Average Claims.
The insurance industry paid an average of 1,200 claims for Income Protection benefit, with a total payout between $60 - $90 million. The industry average duration of a claim was 6 -12 months, with the average monthly benefit $4,000 - $6,000.
Being off work due to mental health accounts for around 20% industry average and 32% for Life Direct, with depression, anxiety, burnout, stress-related conditions, PTSD among the reasons for claims.
An industry average of 42% and 38% for Life Direct, related to for back injuries, broken bones, joint problems, RSI and workplace accidents,
Cancer related claims accounted for 15% industry average and 12% for Life Direct.
We insure our cars, house and home contents as we cannot afford to replace these in the event of a fire, flood, earthquake. Adding up our earnings over the rest of our lives can add up to millions of dollars depending on our age, so why don’t we take seriously the importance of insuring our income? Without it, our bills go unpaid, buying food becomes a challenge, and any savings or investments we are making for our future ‘go out the window’. Relying on family connections to ‘bail us out’ is not a responsible solution, as who knows when they may need the money and cannot share it with us.
Finally, on the point of ACC, if you’re self-employed, are you aware of whether you have ACC Cover Plus or CoverPlus Extra? The difference is important - CoverPlus Extra being an agreed value contract, which can be helpful when needing surety of income at claim time and your business has fluctuating income – check out more here CoverPlus Extra (CPX)
Source: Charlene Overell (G3 Financial Freedom) and MoneyHub NZ - MoneyHub
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