Agreed Value vs Indemnity NZ: What Each Caps, What Each Pays
Agreed value income protection does not simply cost more than indemnity. It caps you lower. On Chubb Life's published limits, a New Zealander earning $120,000 can insure 55% of that income under agreed value but 75% under indemnity, a maximum monthly benefit of $5,500 against $7,500 (Chubb Life, Assurance Extra Income Cover brochure, retrieved 19 August 2026).
That is the trade almost nobody states. Agreed value removes the need to prove income at claim time, and it charges for that certainty twice: once in the premium, and once in a lower ceiling on how much cover you are allowed to buy in the first place. This page charts both halves. Our separate explainer on how the two structures work covers the mechanics, claim scenarios and the proof you need; this one is the priced and charted treatment.
How much cover can you actually buy under each?
The published limits are a sliding scale, and the two scales diverge sharply in the middle of the income range where most professionals sit.
Maximum monthly benefit available by annual income, calculated from the income replacement bands published in the Chubb Life Assurance Extra Income Cover brochure (retrieved 19 August 2026). The percentages are the insurer's; converting them to a monthly figure is our arithmetic. Published product limits, not a quote.
| Annual income | Agreed value share | Agreed value monthly cap | Indemnity share | Indemnity monthly cap |
|---|---|---|---|---|
| $60,000 | 62.5% | $3,125 | 75% | $3,750 |
| $85,000 | 60% | $4,250 | 75% | $5,313 |
| $120,000 | 55% | $5,500 | 75% | $7,500 |
| $200,000 | 55% | $9,167 | 75% | $12,500 |
| $300,000 | 55% | $13,750 | 75% | $18,750 |
| $400,000 | 35% | $11,667 | 50% | $16,667 |
Three things worth pausing on.
The gap widens with income. At $60,000 the agreed value ceiling is 17% below the indemnity ceiling. From $100,001 upwards it is 27% below, and it stays there all the way to $320,000. That is the income range where households have the largest fixed commitments, and it is exactly where agreed value asks you to insure the least.
The scale is not monotonic. On these published bands, a $400,000 earner on agreed value is capped at $11,667 a month, less than the $13,750 allowed to someone earning $300,000. Crossing an income threshold can reduce the cover you are permitted to hold. Anyone approaching $320,000 of income should size the policy before the increase, not after.
The absolute ceilings differ too. Chubb publishes a maximum sum insured of $30,000 a month for both agreed value and indemnity, and $25,000 a month for its Loss of Earnings variants, with cover above $30,000 considered individually and limited to a two-year payment term (Chubb Life brochure, retrieved 19 August 2026).
What each pays when your income falls
This is the case for agreed value, and it is a real one. Under indemnity, the claim is calculated on the lesser of the monthly sum insured or 75% of pre-disability income, less offsets. Under agreed value, the claim is the monthly sum insured regardless of any change in income, less offsets (Chubb Life brochure, retrieved 19 August 2026).
So take the $120,000 earner above, each holding the maximum their basis allows, and let their income fall in the year before claim.
Monthly amount payable before offsets, for a $120,000 earner holding the maximum cover each basis allows ($5,500 agreed value, $7,500 indemnity), as income in the year before claim falls. Calculated from the benefit definitions and income bands published by Chubb Life (retrieved 19 August 2026). Worked illustration, not a quote.
| Income before claim | Agreed value pays | Indemnity pays | Better basis |
|---|---|---|---|
| $120,000 (100%) | $5,500 | $7,500 | Indemnity, by $2,000 |
| $96,000 (80%) | $5,500 | $6,000 | Indemnity, by $500 |
| $88,000 (73%) | $5,500 | $5,500 | Neither, they cross here |
| $72,000 (60%) | $5,500 | $4,500 | Agreed value, by $1,000 |
| $48,000 (40%) | $5,500 | $3,000 | Agreed value, by $2,500 |
The crossover sits at 73% of the income you had when you applied, on the Chubb Life bands and benefit definitions used throughout this page (retrieved 19 August 2026). Above that, the indemnity holder is better off, because the higher ceiling they were allowed to buy outweighs the certainty they gave up. Below it, agreed value wins, and the further income has fallen the more decisively it wins.
That is the correct way to frame the decision, and it is not the way it is usually framed. The question is not "will my income be provable?" It is: how likely is my income to be more than a quarter below its current level in the twelve months before I claim? For a salaried employee on a stable contract, rarely. For a business owner, a contractor, someone on commission, someone in a cyclical trade, or anyone who has recently reduced hours, quite often, and often for reasons connected to the illness itself, which is the case nobody plans for.
One qualification, because it flips the answer. The comparison above puts each basis at its own maximum. If you compare like for like, the same $5,500 sum insured under both, indemnity pays the full $5,500 until income falls below $7,333 a month, and less after that, while agreed value pays $5,500 throughout. On identical sums insured, agreed value is never worse. The only reason indemnity can win at all is the extra cover it lets you hold.
What does each one cost?
Here is where the published record runs out, and it is worth saying so plainly. Neither of New Zealand's two main published income protection quote grids states which basis it priced. Policywise publishes fortnightly figures for six insurers at age 35 with a $6,000 monthly benefit and a 13-week wait, ranging from $26.28 to $36.64 for a man on cover to age 65 (retrieved 19 August 2026). MoneyHub publishes annual figures for five insurers at a $6,250 monthly benefit with a four-week wait, from $1,346.61 to $1,698.38 on cover to age 65 for an office worker (updated 11 June 2026, retrieved 19 August 2026). Neither discloses the benefit basis behind the number.
That is a genuine limitation of both, and it means the widely repeated claim that agreed value costs a specific percentage more than indemnity in New Zealand has no published source behind it. We are not going to supply one. What we can say from the published product limits is that agreed value is the dearer of the two on every rate card we have seen, and that the ceiling difference charted above is a cost in its own right, paid in cover you are not allowed to buy rather than in premium.
If you want the actual differential on your own file, it comes from running both bases through quote software with your occupation and income. The full price picture across age, occupation and insurer sets out what the published grids do tell you.
It is four options, not two
The binary is a simplification. Chubb Life offers Income Cover on four bases, Agreed Value, Indemnity, Loss of Earnings and Loss of Earnings Ultra, with the Loss of Earnings variants available to occupation classes 1 to 4 (Chubb Life brochure, retrieved 19 August 2026). AIA describes three: Agreed Value, Indemnity and Loss of Earnings, the last of which pays on "either agreed value or indemnity, whichever is higher" (AIA New Zealand, income protection insurance, retrieved 19 August 2026).
The Loss of Earnings family is the direct answer to the crossover charted above: it lets the claim be assessed on whichever of the two measures pays more, subject to the sum insured as a ceiling. It also carries a lower maximum sum insured at Chubb, $25,000 a month against $30,000, and, being the better of two outcomes, prices accordingly. If your income is genuinely volatile, this is the variant to ask about by name, because it will not be offered by default.
The offsets differ between the bases as well, and the difference is not cosmetic: on agreed value the monthly benefit itself is reduced by other income received for the same disability, while on the Loss of Earnings variants it is the pre-disability income figure that is reduced before the percentage is applied (Chubb Life brochure, retrieved 19 August 2026). Read the offsets clause before you read the price.
Australia stopped writing agreed value. New Zealand did not
In December 2019 the Australian Prudential Regulation Authority told life companies that, with effect from 31 March 2020, it expected them to discontinue writing individual disability income insurance contracts where benefits are not based on income at the time of claim, including agreed value contracts, on the ground that such contracts "violate the principle of indemnity" and give rise to moral hazard (APRA, sustainability measures for individual disability income insurance, 2 December 2019, retrieved 19 August 2026). APRA also said insurers continuing to write them faced conditions on their registration.
New Zealand has no equivalent measure, and agreed value income cover remains openly available here from at least Chubb Life and AIA on their published product material. That is not a reason to avoid it, an Australian prudential judgement about insurer sustainability is not a judgement about whether the product suits a New Zealand tradesperson with lumpy income. It is a reason to understand that you are buying something a comparable regulator next door concluded was structurally difficult, and to expect its pricing and availability to keep tightening.
Tax follows the payout, not the label
Inland Revenue treats "the cost of income protection insurance if the insurance payout would be taxable" as a deductible non-business expense (Inland Revenue, non-business expenses, retrieved 19 August 2026). Separately, it states that an income protection payout is generally taxable because it replaces lost income, while amounts under personal sickness policies are generally excluded from tax unless calculated by reference to loss of earnings (Inland Revenue, insurance payouts, retrieved 19 August 2026).
The practical consequence is that the deduction and the tax bill travel together. A policy written to pay a taxable benefit generally carries a deductible premium; a policy written to pay a tax-free benefit generally does not. Which one you have been quoted is a question for your accountant, and it changes the after-tax comparison between the two bases far more than a few dollars of premium. Our income protection tax guide goes into the mechanics.
Who each basis suits
Agreed value suits the self-employed, business owners, contractors, commission earners, anyone whose income is falling or about to, anyone taking a career break, and anyone who would find assembling two years of financial records at the worst moment of their life genuinely difficult. It is worth its ceiling for those people.
Indemnity suits salaried employees on stable contracts, people whose income is rising, and anyone who needs the higher sum insured that indemnity permits and could not otherwise get enough cover. It is also the cheaper of the two, which matters when the alternative to a cheaper policy is no policy.
Loss of Earnings variants suit the middle case: volatile income where you still want the higher measure to apply at claim, and you are willing to pay for the option and accept the lower maximum sum insured.
Honest limits
- The caps charted here are one insurer's published bands. Other insurers on the New Zealand market publish different scales, and yours may not match Chubb's.
- The payout illustration assumes no offsets. In practice ACC, sick leave treatment, other policies and returned earnings all change the number, and the offsets clause differs between bases.
- No New Zealand publisher discloses the price difference between agreed value and indemnity, so this page does not state one.
- Agreed value can only be issued if you can evidence income at application. Someone with no recent records cannot get the certainty by asking for it.
- Occupation class governs which bases you are offered at all. Chubb offers Agreed Value and Indemnity to classes 1 to 5 and the Loss of Earnings variants only to classes 1 to 4.
Getting the right basis on your file
Choosing between these is not a preference question, it is an underwriting one: what you can evidence now, what your income is likely to do, and which bases your occupation class is offered. QuoteHub is operated by Craig Smith Business Services Limited, trading as Smiths Insurance and KiwiSaver, a licensed Financial Advice Provider (FSP712931). We can price the same cover on both bases so the ceiling difference is visible before you decide, across the insurers listed on our disclosure page. We are paid commission by the insurer if you take out cover.
References
- Chubb Life, Assurance Extra Income Cover brochure (retrieved 19 August 2026), the four Income Cover bases, income replacement bands, maximum sums insured, offsets and total disability definitions
- AIA New Zealand, income protection insurance (retrieved 19 August 2026), Agreed Value, Indemnity and Loss of Earnings options
- APRA, sustainability measures for individual disability income insurance (2 December 2019, retrieved 19 August 2026), the Australian expectation that agreed value contracts cease from 31 March 2020
- Policywise, Best income protection insurance and comparison quotes (retrieved 19 August 2026)
- MoneyHub NZ, Compare Income Protection Insurance (updated 11 June 2026, retrieved 19 August 2026)
- Inland Revenue, non-business expenses and insurance payouts (retrieved 19 August 2026)
Disclaimer: This article is general information only and does not constitute personalised financial advice. Product limits and prices on this page are reproduced from the named third-party publication beside it, or derived from those figures with the arithmetic shown, and are not a quote from QuoteHub or from any insurer. Insurance is subject to underwriting, and terms, conditions, exclusions and stand-down periods apply. QuoteHub is operated by Craig Smith Business Services Limited, trading as Smiths Insurance and KiwiSaver, a licensed Financial Advice Provider (FSP712931), Christchurch.
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