Why income protection matters
If you couldn't work for months or years, income protection pays a regular, usually tax-free income until you recover or retire. It's the cover that keeps your household running through long-term illness. The best policy depends on how long you could manage before payments start and how long you'd need them.
1. Long-term income protection
Pays until you recover, retire or the policy ends — the most comprehensive option. Best for genuine security, covering long illnesses rather than just short absences. Costs more but protects most fully.
2. Short-term income protection
Pays for a limited period (often 1–2 years) per claim, at a lower cost. Best for those wanting affordable cover, or who have savings or employer sick pay to bridge longer absences.
3. Own-occupation cover
Pays out if you can't do your own job, rather than any job — the most valuable definition. Best for skilled workers; always check the policy uses "own occupation".
4. Choosing your deferred period
The wait before payments begin (e.g. 4, 8, 13, 26 weeks). A longer deferred period lowers the premium. Best matched to your sick pay and savings — the longer you can self-fund, the cheaper the cover.
5. Setting the benefit level
Cover is capped at a percentage of earnings. Set it to cover your essential outgoings realistically. Best calculated from your actual monthly bills rather than over-insuring.
How to choose
- Maximum security: long-term, own-occupation, shorter deferred period
- Lower cost: short-term cover or a longer deferred period
- Match the deferred period to your sick pay and savings
- Always check it's "own occupation"
How to find the best income protection
Definitions and pricing vary widely, so whole-of-market advice matters. A protection specialist will match cover to your job and finances. Find an income protection specialist through Nesto — free, no obligation.
Frequently asked questions
What does income protection cover?
It pays a regular, usually tax-free income if illness or injury stops you working, until you recover, retire or the policy ends.
How much of my income can I protect?
Usually a percentage (often 50–65%) of your gross earnings — capped to keep an incentive to return to work.
What's a deferred period?
The wait before payments begin. A longer deferred period lowers your premium — match it to your sick pay and savings.
What does own-occupation mean?
It pays out if you can't do your specific job, rather than any job — the most useful definition to look for.
Long-term or short-term cover?
Long-term offers the most security; short-term is cheaper and suits those with savings or employer sick pay.