Income Protection & Mental Health NZ: Claims & Cover Guide | QuoteHub

By QuoteHub Editorial Team · Updated 2025-11-20

Income Protection and Mental Health in NZ: Claims, Cover, and What to Know

Mental health conditions now account for approximately 32% of all income protection claims in New Zealand. That makes them the single largest claim category, ahead of musculoskeletal injuries and cancer. If you have ever experienced anxiety, depression, burnout, or any other mental health condition, understanding how income protection works for these claims is essential.

This guide focuses specifically on income protection claims for mental health conditions. It covers how the claims process works, what conditions are included, what may be excluded, and how to navigate underwriting if you have a mental health history.

The Growing Reality of Mental Health Claims

Mental health claims have been rising steadily across the New Zealand insurance industry. Several factors are driving this trend.

Prevalence is increasing. In the year to June 2025, 14.3% of New Zealand adults (approximately 619,000 people) experienced high or very high psychological distress. Among young adults aged 15 to 24, the figure was 22.9%.

Workplace demands are changing. The shift to hybrid and remote work, increasing workloads, and blurred boundaries between work and personal life have contributed to higher rates of burnout and anxiety across many professions.

Stigma is reducing. More people are seeking diagnosis and treatment for conditions they may have previously endured in silence. This is a positive development, but it also means more claims are being lodged.

Claims duration tends to be longer. Mental health claims often have longer recovery periods than physical injury claims. A broken arm typically has a clear treatment pathway and recovery timeline. Depression or severe anxiety may require months of treatment, medication adjustment, and gradual return-to-work planning.

These figures reflect industry-wide data. The exact proportions vary between insurers, but mental health consistently leads across most providers.

How Mental Health Claims Work

If you need to make an income protection claim for a mental health condition, the process follows a similar structure to any other claim, but with some specific requirements around documentation and assessment.

Step 1: Notify Your Insurer

Contact your insurer or your financial adviser as soon as you know you will be unable to work. Most policies require notification within a specified period (typically 30 to 90 days of becoming unable to work). Your adviser can handle this on your behalf if you are not up to it, which is common during a mental health crisis.

Step 2: Medical Evidence

The insurer will require medical evidence supporting your claim. For mental health conditions, this typically includes:

• A diagnosis from your GP, psychiatrist, or clinical psychologist
• Clinical notes outlining symptoms, severity, and functional impact
• A statement confirming you are unable to perform the duties of your occupation
• Treatment plan and expected duration of incapacity

Some insurers may also request a functional assessment, which evaluates your ability to perform specific work tasks rather than relying solely on diagnosis. This is becoming more common and can actually work in your favour, as it focuses on your real-world capacity rather than diagnostic labels.

Step 3: Waiting Period

Your policy will have a waiting period (also called a stand-down period) before payments begin. Common waiting periods are 4 weeks, 8 weeks, or 13 weeks. The waiting period starts from the date you became unable to work, not from the date you lodged the claim.

If you have chosen a longer waiting period to reduce premiums, you will need savings or other support to bridge that gap. For mental health conditions, where the onset can be gradual, establishing the exact start date may require discussion between your medical team and the insurer.

Step 4: Ongoing Assessment

Unlike a surgery with a clear recovery date, mental health claims are often reviewed at regular intervals. The insurer may request updated reports from your treating clinician every 4 to 12 weeks. This is standard practice and not a sign that your claim is being questioned.

You will be expected to be actively engaged in treatment. This might include medication, therapy (such as cognitive behavioural therapy or CBT), or a structured rehabilitation programme.

What Conditions Are Covered

Income protection policies in New Zealand do not typically list specific mental health conditions that are or are not covered. Instead, the key question is whether the condition prevents you from performing the material duties of your occupation. If it does, and you meet the policy definition of disability, you have a valid claim.

That said, the following conditions commonly result in successful income protection claims:

• Major depressive disorder. The most common mental health claim. Severe depression that prevents you from concentrating, making decisions, or maintaining the attendance required for your role.
• Anxiety disorders. Generalised anxiety disorder, panic disorder, and social anxiety disorder where the severity prevents normal work functioning.
• Post-traumatic stress disorder (PTSD). Particularly common among first responders, healthcare workers, and people who have experienced traumatic events.
• Bipolar disorder. Both manic and depressive episodes can prevent someone from working safely and effectively.
• Burnout and adjustment disorders. Increasingly recognised as legitimate conditions that can cause significant functional impairment. These are typically classified under stress-related or adjustment disorder diagnoses.
• Obsessive-compulsive disorder (OCD). Where the severity interferes with the ability to perform work duties.

The critical factor is not the diagnosis itself but the functional impact. An insurer will assess whether the condition genuinely prevents you from doing your job, not whether the condition sounds "serious enough."

What May Be Excluded

While income protection covers a wide range of mental health conditions, there are some common exclusions and limitations.

Pre-existing Conditions

This is the most significant exclusion area. If you had a diagnosed mental health condition before you applied for cover, the insurer may:

• Apply a mental health exclusion. The policy covers everything except claims arising from mental health conditions. This is the most restrictive outcome.
• Apply a specific condition exclusion. For example, excluding claims for depression but covering anxiety, PTSD, and other conditions.
• Apply a stand-down period. Covering mental health claims only after a specified period (such as 2 or 3 years) of no treatment or symptoms.
• Offer standard terms. If your condition was mild, well-managed, and in the past, some insurers will offer full cover with no exclusion.

The outcome depends heavily on the nature of your condition, how recently you were treated, and which insurer you apply with. Different insurers have different appetites for mental health risk, which is why working with an adviser who knows the market is valuable.

Other Exclusions

• Self-inflicted injury. Intentional self-harm is typically excluded.
• Substance abuse. Claims arising primarily from drug or alcohol misuse may be excluded, though this varies between policies. Some insurers cover conditions that develop as a consequence of substance abuse (such as depression) even if the substance abuse itself is excluded.
• Criminal activity. Conditions arising from participation in criminal activity are excluded.
• Failure to follow treatment. If you refuse reasonable treatment recommended by your medical team, the insurer may decline or suspend your claim.

The Disclosure Dilemma

One of the most common concerns people have is whether they should disclose past mental health treatment when applying for income protection. The answer is straightforward: yes, always.

Why Full Disclosure Matters

New Zealand insurance operates on a principle of utmost good faith. When you apply for cover, you are legally required to disclose all material information. This includes any mental health conditions you have been diagnosed with, medication you have taken, therapy you have received, or referrals you have been given.

If you fail to disclose and later make a claim, the insurer can:

• Decline the claim entirely
• Void the policy from inception (as if it never existed)
• Refuse to pay any benefit, even for unrelated conditions

This applies regardless of whether the claim is related to the undisclosed condition. Non-disclosure can invalidate your entire policy.

What Happens When You Disclose

Many people fear that disclosing a mental health history will make them uninsurable. In practice, this is rarely the case. Here is what typically happens:

Mild or historical conditions (e.g., a short course of antidepressants 5+ years ago, counselling after a life event). Many insurers will offer standard terms or terms with a short-term exclusion. Some may request a GP report.

Moderate conditions (e.g., ongoing anxiety management, current medication). You may receive an exclusion for the specific condition, a loading (higher premium), or a waiting period before mental health claims are accepted. Cover for all other conditions remains unaffected.

Severe or complex conditions (e.g., recent hospitalisation, multiple medications, ongoing specialist treatment). The insurer may decline mental health cover or postpone the application until treatment has stabilised. However, you can still typically get cover for physical conditions.

The key point is that partial cover is better than no cover. Even a policy with a mental health exclusion still protects you against cancer, heart disease, musculoskeletal injuries, and every other condition that could stop you from working.

How Insurers Underwrite Mental Health History

Understanding the underwriting process can reduce anxiety about applying. When you disclose a mental health history, the insurer's underwriting team will typically consider:

• Diagnosis. What condition was diagnosed and by whom.
• Treatment history. What treatment was received (medication, therapy, hospitalisation) and for how long.
• Recency. How recently you were treated or experienced symptoms. A single episode of depression 10 years ago is very different from current ongoing treatment.
• Severity. Whether the condition required hospitalisation, caused time off work, or involved specialist care.
• Stability. Whether the condition is stable and well-managed, or fluctuating and unpredictable.
• Occupation. Some occupations carry higher mental health risk (such as healthcare, emergency services, high-pressure corporate roles), which may factor into the assessment.

An experienced financial adviser can present your application in the most favourable light. They know which insurers are more receptive to mental health histories and can structure the application to maximise your chances of getting the best possible terms. If you want to understand your options, you can talk to an adviser through QuoteHub at no cost.

The ACC Gap: Why Income Protection Matters for Mental Health

A critical point that many New Zealanders do not realise is that ACC does not cover mental health conditions unless they arise directly from a physical injury or specific work-related trauma (such as a workplace sexual assault or witnessing a traumatic event in certain occupations).

This means:

• Depression that develops due to work stress, relationship breakdown, grief, or chemical imbalance is not covered by ACC
• Anxiety disorders, burnout, bipolar disorder, and OCD are not covered by ACC
• Even PTSD is only covered by ACC in very narrow circumstances involving a specific traumatic event

If a mental health condition stops you from working and it does not meet ACC's strict criteria for cover, you have no government safety net beyond general welfare benefits. Income protection insurance fills this gap entirely. It is the only financial product that replaces your income when a mental health condition prevents you from working.

For more on the gaps in ACC cover, see our guide on what ACC does not cover.

Tips for Making a Mental Health Claim

If you are considering making a claim, or if you are currently struggling and think you may need to stop work, these practical steps can help.

1. Get professional support early. See your GP or a mental health professional as soon as symptoms begin to affect your work. Early intervention improves outcomes and creates the medical record that will support a future claim if needed.

2. Keep records. Note when symptoms started, how they affect your daily functioning and work capacity, and what treatment you are receiving. This information is valuable when completing claim forms.

3. Talk to your adviser. If you have an existing policy, contact your financial adviser before lodging a claim. They can guide you through the process and liaise with the insurer on your behalf. This removes administrative stress during a difficult time.

4. Be honest and thorough. When completing claim forms, describe your symptoms and their impact on your work capacity in detail. Insurers are not looking for reasons to decline claims, but they do need sufficient information to assess them.

5. Engage with treatment. Insurers expect claimants to be actively seeking treatment. This does not mean you have to follow a specific treatment plan, but you should be working with your medical team toward recovery.

6. Understand your policy definition. Check whether your policy uses an "own occupation" or "any occupation" definition of disability. Own occupation cover is more favourable, as it assesses whether you can do your specific job, not just any job at all.

Rehabilitation and Return-to-Work Support

Most New Zealand insurers now offer rehabilitation support as part of their income protection policies. For mental health claims, this may include:

• Access to clinical psychologists or psychiatrists. Some insurers will fund treatment sessions that might otherwise involve long wait times through the public system.
• Occupational rehabilitation. Working with an occupational therapist to develop a gradual return-to-work plan.
• Workplace mediation. If workplace factors contributed to the condition, some insurers will facilitate discussions with your employer about modified duties or workplace adjustments.
• Vocational support. If you cannot return to your previous role, some policies include support for retraining or transitioning to a different occupation.

This is an area where insurers have improved significantly in recent years. The industry recognises that supporting recovery and return to work benefits everyone: the claimant returns to meaningful employment, and the insurer reduces the duration and cost of the claim.

If you are comparing income protection policies, ask your adviser about the rehabilitation support each insurer offers. It can make a significant difference to your recovery experience. You can compare income protection options to understand the differences between providers.

Getting the Right Cover

Mental health conditions are real, common, and increasingly well-understood by New Zealand insurers. The idea that you cannot get income protection if you have a mental health history is, in most cases, simply wrong. The cover may come with specific terms, but some cover is always better than none.

If you are unsure whether you can get cover, or if you already have a policy and want to understand how a mental health claim would work, talk to an authorised financial adviser. Through QuoteHub, you can get matched with an adviser who understands mental health underwriting and can help you navigate the process. There is no cost to you for this advice.

The best time to arrange income protection is before you need it. If you are well today, you will get the best terms. If you are currently struggling, it is still worth exploring your options, as partial cover protects you against every other condition that could stop you from earning.

Frequently Asked Questions

Can I get income protection if I am currently taking antidepressants?

Yes, in most cases. The insurer will assess the type of medication, how long you have been taking it, the underlying condition, and how well it is managed. You may receive standard terms, a mental health exclusion, or a loading depending on the specifics. An experienced adviser can help you find the insurer most likely to offer favourable terms.

Will my premiums be higher because of a mental health history?

Not necessarily. Some insurers apply a loading (percentage increase on the standard premium) for mental health histories. Others offer standard premiums but with a condition-specific exclusion. The outcome varies between insurers, which is why comparing the market through an adviser is important. For more on how income protection insurance works, see our comparison guide.

How long do mental health income protection claims last?

The average duration varies, but mental health claims tend to be longer than many physical injury claims. Some last a few months, while others extend to a year or more. The benefit period in your policy sets the maximum (commonly 2 years, 5 years, or to age 65). Your insurer will review the claim periodically and work with your treating team on a return-to-work plan.

Can my claim be declined if I was not seeing a psychiatrist?

No. You do not need to be under specialist psychiatric care to make a valid claim. A diagnosis and supporting documentation from your GP is generally sufficient. However, the insurer may request a specialist assessment as part of the claims process, particularly for complex or prolonged conditions.

Does income protection cover burnout?

Burnout itself is not a formal medical diagnosis in New Zealand. However, the symptoms of burnout (exhaustion, reduced functioning, inability to concentrate) often meet the criteria for diagnoses such as adjustment disorder, major depressive episode, or generalised anxiety disorder. If your treating clinician provides a recognised diagnosis and confirms you are unable to work, the claim can proceed. For a broader overview, see our guide on insurance and mental health in NZ.

What if my employer offers income protection as a group benefit?

Group income protection schemes provided by employers often have more lenient underwriting for mental health. Because the insurer is covering a pool of employees, individual health assessments may be less detailed. However, group cover typically ends when you leave the employer. If you rely on group cover, consider whether you also need a personal policy to ensure continuity.

References

• ACC New Zealand , What we cover

• Financial Markets Authority (FMA) , Insurance guidance

• Sorted.org.nz , Income protection

• Insurance & Financial Services Ombudsman (IFSO)

• Stats NZ , Income and earnings

• Cancer Society of New Zealand

• Heart Foundation NZ

• Mental Health Foundation NZ

• New Zealand Health Survey, Annual Update 2024/25, Ministry of Health.

• ACC, What We Cover and What We Do Not, 2025.

• Various NZ insurer Product Disclosure Statements (AIA, Asteron, Chubb, Fidelity Life, nib, Partners Life), 2025/2026.

• Financial Markets Authority, Financial Advice Provider Register, 2025.

• OECD, Health at a Glance 2024, Mental Health chapter.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. QuoteHub (FSP 712931) connects New Zealanders with authorised financial advisers. Insurance needs vary based on your personal circumstances, occupation, and health. Always seek personalised advice from an authorised adviser before making insurance decisions.

Explore related pages: Life Insurance, Income Protection, Health Insurance, Trauma Insurance.