Mortgage Protection vs Income Protection NZ: What Each One Pays
Mortgage repayment cover and income protection are both monthly disability benefits triggered by illness or injury, but mortgage repayment cover caps the payout against a home loan repayment or a fixed share of income, while standard income protection typically replaces up to 75% of income for any use. Offset treatment varies by insurer and cover: AIA's mortgage-style cover only offsets a combined ACC/WINZ amount above $7,500 a month, against a dollar-for-dollar offset on its standard income protection (AIA), while Partners Life applies no ACC/WINZ offset at all to its Mortgage Repayment Cover. Mortgage repayment cover is more often structured as a benefit not calculated by reference to lost earnings, so it commonly falls outside Inland Revenue's taxable-income rules, while a standard income protection payout is generally taxable because it directly replaces income. A licensed adviser at QuoteHub can confirm which structure applies to a specific policy.
In short
- AIA's standard income protection is offset dollar-for-dollar by ACC and WINZ, but its Mortgage, Income or Rent Cover is offset only for the combined ACC/WINZ amount over $7,500 a month (AIA, retrieved 17 September 2026).
- Partners Life Mortgage Repayment Cover pays the greater of 45% of pre-tax income or the actual mortgage repayment, up to $40,000 a month (Partners Life factsheet, retrieved 8 September 2026).
- Standard income protection commonly replaces up to 75% of pre-tax income; OneChoice's direct, no-medical version caps the benefit at $15,000 a month (OneChoice, retrieved 9 September 2026).
- Inland Revenue treats an income protection payout as generally taxable, while personal sickness payouts are "generally excluded from being taxable income" unless calculated by reference to loss of earnings (Inland Revenue, retrieved 8 September 2026).
Both products answer the same fear: illness or injury stops you working and the bills keep arriving. But they are not the same product with two names. One is sized against your home loan; the other against your income, whatever you spend it on. The offset rules, tax outcome and underwriting all differ once you compare the actual policy documents rather than the product names.
What each product actually is
No licensed New Zealand insurer sells a standalone disability-triggered product literally named "mortgage protection insurance"; the search term maps to mortgage repayment cover. Pinnacle Life did sell a standalone Mortgage Insurance product, but it was a death benefit that paid the mortgage lender directly if the policyholder died, not a disability income replacement; Pinnacle Life withdrew it from sale in November 2020, so only existing policyholders keep it (Pinnacle Life, retrieved 9 September 2026). Income protection pays for any use, not just housing costs.
| Mortgage repayment cover | Income protection | |
|---|---|---|
| Who sells it | AIA, Chubb Life, Asteron Life, Fidelity Life, Partners Life (AIA) | Same five, plus OneChoice direct (OneChoice) |
| What it pays for | Housing costs specifically, but paid to you | Any use: rent, groceries, childcare, debt |
At Partners Life, the benefit is not tied to your actual mortgage debt: if repayments sit below 45% of pre-tax income, the cap is 45% of income instead, and if repayments run higher, the higher figure becomes the cap (Partners Life factsheet, retrieved 8 September 2026). A high earner with a small mortgage can end up insured for more than their repayment; a lower earner with a large mortgage may find the benefit falls short.
How much does each one pay?
Mortgage repayment cover generally caps out around 45% of income or the actual repayment, while standard income protection more commonly stretches to 75% of income. AIA caps its mortgage-style cover at the greater of 115% of rental or mortgage repayments, or 45% of gross income (AIA, retrieved 17 September 2026), while Chubb Life uses the same 115% rent-or-mortgage cap against 45% of annual income (Chubb Life, retrieved 17 September 2026). OneChoice's income protection insures up to 75% of pre-tax income, up to $15,000 a month, whether or not you carry a mortgage (OneChoice, retrieved 9 September 2026).
| Feature | Mortgage repayment cover | Income protection |
|---|---|---|
| Typical benefit cap | 45% of income, or actual repayment/rent (up to 115% at AIA and Chubb) | Commonly up to 75% of pre-tax income |
| Death benefit | None | None |
| Published example cap | $40,000/month, Partners Life | $15,000/month, OneChoice |
Neither product is in the QuoteHub Premium Index this cycle: the September 2026 snapshot covers Life, Trauma and TPD only, and its income protection rows were withdrawn after a benefit-mapping error, pending the next quarterly rebuild. Ask a licensed adviser for a quote against your own income and occupation.
How ACC and WINZ offsets differ
Whether a policy reduces its payment because of an ACC or WINZ payment depends on the insurer and the specific cover, not on the product category as a whole. AIA's standard income protection offsets ACC and WINZ dollar-for-dollar from the first dollar, while its Mortgage, Income or Rent Cover only reduces once combined ACC/WINZ income crosses $7,500 a month, across all AIA mortgage protection type products (AIA, retrieved 17 September 2026).
That threshold rarely binds. ACC pays up to 80% of pre-injury earnings, capped at a gross maximum of $2,466.20 a week from 1 July 2026 and a gross minimum of $766.40 a week for full-time earners from 1 April 2026 (ACC Newsroom, 1 July 2026; 1 April 2026, both retrieved 8 September 2026). At typical wage earnings, ACC alone sits well under AIA's $7,500 threshold, so an accident claim can often draw both ACC and the full mortgage-style benefit at once.
Partners Life takes the opposite approach on its own Mortgage Repayment Cover: total disability claims carry "no offsets" at all, the same rule that applies to its Household Expenses Cover, while each of its Income Cover variants (its income protection range) states only that "offsets apply", with no dollar threshold given in the product overview (Partners Life, Monthly Disability Cover overview, retrieved 8 September 2026). So the specific offset rule always sits in the individual policy, not a general market rule. Because ACC only responds to accidents, offsets are moot for illness claims: cancer, heart disease, stroke and most degenerative or mental health conditions sit outside ACC entirely, so an illness claim on either product is paid with no ACC offset at all (ACC).
Is the payout taxed?
Inland Revenue's default position is that an income protection payout "is to replace lost income" and so "it's generally taxable," while a personal sickness payout is "generally excluded from being taxable income" unless calculated by reference to loss of earnings (Inland Revenue, retrieved 8 September 2026). That is why mortgage repayment cover is more often treated as tax-free and standard income protection is more often taxable, though the actual outcome always depends on the specific policy wording, not the product's marketing name.
Inland Revenue also allows a deduction for "the cost of income protection insurance if the insurance payout would be taxable" (Inland Revenue, last updated 29 October 2025, retrieved 8 September 2026), though PAYE employees paying their own premiums generally cannot claim it, because the employment limitation in section DA 2 of the Income Tax Act 2007 denies a deduction for expenditure incurred in earning employment income, and they receive their payout tax-free instead. See our income protection tax guide for the full breakdown, and confirm your own policy's tax position with an accountant or licensed adviser.
Underwriting: full medical vs a phone application
Mortgage repayment cover is sold almost entirely through advisers with full medical and financial underwriting, while at least one income protection product is sold direct with no medical exam at all. AIA's mortgage-style cover runs a 16-to-55 entry age (60 in a managerial role), with waiting periods from 4 to 104 weeks and benefit periods to age 65 or 70, requiring proof of income at application (AIA, retrieved 17 September 2026). OneChoice's income protection, by contrast, can be applied for "in just one phone call" with "no medical or blood tests needed," for employees and the self-employed aged 16 to 60 working at least 15 hours a week (OneChoice, retrieved 9 September 2026).
The trade-off is not the entry price: OneChoice still reduces the claim to the lesser of the sum insured or "75% of your pre-tax income," minus offsets including "paid sick leave, other insurance policies, ACC or any other government agency payment" (OneChoice, retrieved 9 September 2026). Simplified underwriting speeds up how quickly cover starts; insurers skipping full underwriting at application typically ask more questions at claim time instead.
When should you hold both?
Most households do not need both at full strength, but a combination can make sense where the mortgage payment and total living costs are both large relative to income. Partners Life's own product range reflects the same split: Mortgage Repayment Cover is sized against housing costs specifically, while its Income Cover variants are sized as a percentage of income for any use (Partners Life, Monthly Disability Cover overview, retrieved 8 September 2026). Stacking is not unlimited: under the Partners Life Journey Plan, Mortgage Repayment Cover and Household Expenses Cover together are capped at a combined $8,000 a month, while Income Cover is assessed and capped separately (Partners Life, Monthly Disability Cover overview, retrieved 8 September 2026).
Size cover against full monthly outgoings, not just the mortgage repayment. If the mortgage is your largest fixed cost and other expenses are modest, mortgage repayment cover alone may be enough; if total living costs meaningfully exceed the repayment, income protection is more likely to keep you solvent. A licensed adviser can run both scenarios against your actual budget.
Frequently Asked Questions
Is mortgage protection insurance the same thing as income protection?
No. Mortgage protection (properly, mortgage repayment cover) caps the benefit against your home loan repayment or roughly 45% of income, while standard income protection more commonly replaces up to 75% of income for any spending purpose (OneChoice, retrieved 9 September 2026).
Does ACC pay on top of either policy?
ACC only responds to accidents, not illness. Whether an accident claim that also qualifies for ACC gets reduced depends on the insurer and cover: AIA only reduces its mortgage-style cover once combined ACC/WINZ income crosses $7,500 a month (AIA, retrieved 17 September 2026), while Partners Life applies no ACC offset at all to its Mortgage Repayment Cover (Partners Life, Monthly Disability Cover overview, retrieved 8 September 2026).
Is mortgage repayment cover tax-free?
Often, but not automatically. Inland Revenue generally excludes personal sickness payouts from taxable income unless the amount is calculated by reference to loss of earnings (Inland Revenue, retrieved 8 September 2026). Because mortgage repayment cover is commonly fixed against a repayment figure rather than continuously recalculated against lost earnings, it is more often treated this way, but the specific policy wording decides the outcome.
Do I need life insurance as well?
Usually yes, if you have dependants. Neither product pays anything on death; both stop as soon as you die, recover, or reach the end of the benefit term. Life insurance is what clears the mortgage or replaces income for your family after you are gone.
Talk to a Licensed Adviser
A licensed adviser can compare both covers against your actual mortgage, income and household budget, check the specific offset and tax wording of each insurer's policy, and recommend a benefit level and waiting period that fits your situation, with no pressure to buy on the spot. Start your free check or read more on the mortgage protection and income protection hubs first.
References
- AIA, Mortgage, Income or Rent Cover (retrieved 17 September 2026)
- Chubb Life, Mortgage Repayment Cover (retrieved 17 September 2026)
- Partners Life, Mortgage Repayment Cover factsheet (retrieved 8 September 2026)
- Partners Life Journey Plan, Monthly Disability Cover overview (retrieved 8 September 2026)
- OneChoice, Income Protection Insurance (retrieved 9 September 2026)
- Pinnacle Life, Funeral & Mortgage Insurance Policy Holders (retrieved 9 September 2026)
- Inland Revenue, insurance payouts (retrieved 8 September 2026)
- Inland Revenue, non-business expenses (last updated 29 October 2025, retrieved 8 September 2026)
- Income Tax Act 2007, section DA 2 (employment limitation)
- ACC Newsroom, changes to client payments from 1 July 2026 (retrieved 8 September 2026)
- ACC Newsroom, changes to client payments from 1 April 2026 (retrieved 8 September 2026)
- ACC, what we cover (retrieved 17 September 2026)
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Explore related pages: Life Insurance, Income Protection, Health Insurance, Trauma Insurance, How Were Paid.