Redundancy Insurance NZ vs Income Protection Insurance – Expert Tips
Understanding redundancy insurance NZ vs income protection insurance is crucial for New Zealand workers facing both job loss and health-related income risks. With redundancy rates rising in specific industries and ACC covering most work-related injuries, choosing the right cover ensures financial resilience. This article compares redundancy insurance NZ vs income protection insurance side by side—using a concise table and infographic guidance—so you can decide which suits your needs.
Redundancy Insurance Basics
Definition & Purpose
Redundancy insurance NZ provides a short-term monthly benefit—typically three to six months—if your employer makes you involuntarily redundant. It covers only job-loss events, not illness or injury. An income protection insurance redundancy rider (offered by some insurers) adds a limited redundancy benefit to an income protection policy; it is not a standalone redundancy policy. When evaluating redundancy insurance NZ vs income protection insurance, know that pure redundancy cover pays only after an employer-initiated job loss.
Eligibility & Key Features
- Employment Status: Available only to full-time employees—self-employed options are rare. Always confirm eligibility if you are self-employed.
- Qualifying Period: Typically, six months of continuous service before cover applies.
- Waiting Period: After confirmed redundancy, most policies require a 30-day waiting period before benefits are paid out.
- Covered Events: Only employer-initiated job loss qualifies—no coverage for voluntary resignation, dismissal for misconduct, or redundancies within labour disputes.
Benefit Structure & Duration
- Payout Amount: Often a fixed monthly sum (e.g., NZ$2,000–NZ$6,000) or a percentage of your pre-redundancy salary.
- Benefit Period: Common options are 3, 4, or 6 months.
- Cheap Redundancy Insurance: To find cheap redundancy insurance, consider lengthening the waiting period or shortening the benefit period. This lowers your premium but delays or limits the payout.
Exclusions & Limitations
- Excludes voluntary resignations, dismissals for misconduct, redundancies within six months of policy start, redundancies due to labour disputes, and age caps (usually ends at around 65).
- An income protection insurance redundancy add-on increases premiums significantly; standalone redundancy cover remains the most straightforward option for pure job-loss protection.
Note: Since late 2024, legislative changes have further restricted new standalone redundancy policies—most new redundancy cover now appears only as an optional add-on within broader income protection
Deep Dive on Redundancy Cover
For more details on features, exclusions, and typical redundancy insurance costs, see Redundancy Insurance in NZ: Why Do You Need It?. To learn about statutory redundancy rights and employer obligations, read Redundancy in New Zealand: Know Your Rights . Keep in mind: when weighing redundancy insurance NZ vs income protection insurance, redundancy cover only kicks in for job loss.
Income Protection Insurance Basics
Definition & Purpose
Now let’s review redundancy insurance NZ vs income protection insurance from the health-related side. Income protection insurance pays up to 75 per cent of your pre-disability income if illness or injury prevents you from working. It does not cover job loss—an income protection insurance redundancy benefit requires a specific rider or a combined policy. In summary, redundancy insurance protects against job loss, whereas income protection covers you if illness or injury prevents you from working. ACC covers most work-related injuries first—income protection then tops up so you receive your full insured percentage.
Eligibility & Key Features
- Who Can Apply: Both employed and self-employed individuals working a minimum of about 20 hours per week.
- Medical Underwriting: “Insurers assess pre-existing conditions and medical history; loadings (i.e., additional premium surcharges for higher-risk applicants) or exclusions may apply.
- Waiting Period: You choose from 14, 30, 60, or 90 days. Longer waits result in lower premiums; shorter waits mean getting paid sooner.
- Benefit Period: Options range from 2 years, 5 years, or up to age 65. Longer benefit periods cost more but provide extended protection.
Benefit Structure & Payout
- Payout Amount: Generally 75 per cent of insured income, reduced by any ACC entitlements for work-related injuries.
- Exclusions: Illness or injury must meet policy definitions; no coverage for redundancy, voluntary unemployment, or non-medical reasons (e.g., caregiving). Mental-health exclusions can apply unless specifically included.
Deep Dive on Income Protection
For a full breakdown of policy mechanics, ACC interplay, and income protection insurance redundancy quotes, see What Is Income Protection Insurance in NZ? 2025 Guide for Kiwis.
Side-by-Side Comparison: At a Glance
Below is a concise table comparing redundancy insurance NZ vs income protection insurance. It addresses all core differences—covered events, waiting periods, benefit durations, exclusions, cost estimates, tax treatment, and access for the self-employed.
| Feature | Redundancy Insurance | Income Protection Insurance |
| Covered Events | Employer-initiated job loss only | Illness or injury only (no job-loss coverage) |
| Qualification & Waiting Period | 6 months qualifying + 30 days waiting | No qualifying period; choose waiting period (14–90 days) |
| Benefit Duration | 3–6 months | 2 years, 5 years, or up to age 65 |
| Payout Amount | Fixed sum (e.g., NZ$2,000–NZ$6,000) or % of salary | Up to 75% of insured income; ACC offset applies |
| Exclusions | Voluntary exit, misconduct, redundancies within 6 months of policy start, labour disputes, age cap (65) | Redundancy, voluntary unemployment, caregiving reasons, undeclared pre-existing conditions, and some mental health conditions |
| Cost Estimates | NZ$20–$50/month per NZ$10K insured (redundancy insurance cost, cheap redundancy insurance) | NZ$40–$100/month for NZ$50K income with a 30-day wait (varies by wait/benefit period, age, occupation, health) |
| Tax Treatment | Unclear deductibility—consult IRD on personal vs. business expense | Premiums are generally tax-deductible; payouts are taxable |
| Self-Employed Access | Rarely available; if offered, premiums are higher and the “redundancy” definition differs. | Available; ACC coordination requires proof of earnings (see ACC’s Self-Employed) |
Cost, Tax, and Self-Employed Considerations
When comparing costs, note that redundancy insurance NZ vs income protection insurance premiums differ based on waiting periods and benefit lengths.
1. Premium Drivers (Both Policies)
○ Age, occupation risk rating, insured income, waiting period, benefit period, optional riders (e.g., “redundancy insurance cover,” inflation protection).
2. Redundancy Insurance Cost
○ Typical Range: NZ$20–$50/month for every NZ$10,000 of annual salary insured. As of 2025, actual premiums vary by insurer—see MBIE for guidance
○ To find cheap redundancy insurance, extend the waiting period beyond 30 days or shorten the benefit period to 3 months.
3. Income Protection Premium Estimates
○ Example: According to the 2025 FMA Insurance Cost Report, a healthy 30-year-old pays approximately NZ$60–$90/month for a NZ$50K insured income.
○ Adjust by increasing the waiting period to 90 days or reducing the benefit period to 2 years. Loadings apply for smokers, hazardous occupations, and pre-existing health conditions.
4. Tax Treatment
○ Income Protection: Premiums are generally tax-deductible; any payout is taxable income. (Source: IRD, 2025).
○ Redundancy Insurance: Deductibility and payout taxation aren’t clearly defined in publicly available NZ sources—consult IRD’s business vs. personal expense guidelines or a tax adviser.
5. Self-Employed Nuances
○ Income Protection: Accessible to the self-employed. ACC coordination requires proof of earnings and confirmation of ACC levy payments—see our Self-Employed guideline.
○ Redundancy Insurance: Rarely offered to self-employed individuals. If you find a policy, premiums will be higher, and the definition of “redundancy” may differ (e.g., loss of contract vs. layoff).
When to Choose Which: Decision Checklist
To decide between redundancy insurance NZ vs income protection insurance, consider these scenarios.
1. Prioritise Redundancy Insurance If…
○ You work in a high-redundancy industry (e.g., retail, construction, or tech sectors facing automation).
○ You have short-term financial obligations—mortgage, car loan, school fees—that need coverage for up to six months.
○ You’re healthy and want a lower-cost, single-purpose “redundancy insurance cover.”
2. Prioritise Income Protection If…
○ Your primary risk is illness or injury (e.g., manual labourers, older professionals, or those with dependents).
○ You have long-term financial commitments (family, ongoing medical costs).
○ You want tax-deductible premiums and the option to be covered until retirement age.
3. Consider Both If…
○ You need a comprehensive safety net for both job loss and incapacity.
○ You can afford two premiums and meet each policy’s eligibility criteria.
○ Your role carries both redundancy risk and moderate health-related work interruption risk.
Frequently Asked Questions
- Does Income Protection Cover Redundancy?
No. Standard income protection insurance does not cover redundancy. To obtain redundancy cover, you need standalone redundancy insurance in New Zealand or a specific rider that includes redundancy benefits. - Can You Add Redundancy to Income Protection?
Yes—some insurers offer bundled policies or riders that include a short-term redundancy benefit. When you request income protection insurance redundancy quotes, expect higher premiums compared to standalone redundancy cover. - What If I’m Redundant and Then Get Sick?
Claim your redundancy insurance benefit first. If you later become ill or injured, submit an income protection claim, subject to its waiting period and policy definitions. - Does ACC Cover Any of This?
ACC covers work-related injuries and appointed illnesses only; it does not cover redundancy. If you make a work-injury claim through ACC, any subsequent income protection payout will offset your ACC payment. - Are There Age Limits?
Most redundancy insurance policies in New Zealand terminate cover at age 65. Income protection policies typically cap the benefit period at retirement age—commonly 65—though some allow cover until age 67. - Do I Need Both If I’m Self-Employed?
Focus on income protection as a self-employed individual—ACC coordination requires proof of earnings. True redundancy cover for self-employed people is rare and expensive; most policies assume employee status.
Ready to secure your income? See how much income protection insurance redundancy riders cost and compare plans tailored to your profile:
Conclusion
In summary, redundancy insurance NZ vs income protection insurance addresses two distinct risks: involuntary job loss and illness/injury. Redundancy insurance provides short-term job-loss support, while income protection offers longer-term incapacity coverage. Your choice depends on your industry’s redundancy risk, financial commitments, health status, and whether you are self-employed. Use the linked deep-dive articles for more detail, consider the decision checklist, and compare income protection options now to ensure you’re covered for whatever lies ahead.
