Income Protection When You Change Jobs or Go Self-Employed in NZ (2026): Keeping Your Cover Valid

Change jobs or go self-employed in NZ and your income protection may not work the way you expect. Here is what occupation class, pay changes, wait periods and ACC mean for keeping your cover valid.

This article is general information only and is not personalised financial advice. It does not take into account your particular financial situation, goals or needs. Before acting, consider whether it's right for you and seek advice tailored to your circumstances.

A new job, a pay rise, or a move out on your own can all change how your income protection responds at claim time, even when the policy itself never lapses. The cover usually stays in force, but the details it was priced and written on can drift out of date. This guide walks through what changes when your work changes, and what is worth reviewing to keep the cover valid for your new situation.

TL;DR: Income protection generally stays with you when you change jobs, but a different occupation class, a pay change, or going self-employed can all affect how a claim is assessed. ACC moves from your employer's accident cover (which pays up to 80% for injury) ¹ to self-employed cover you arrange and pay for yourself. A short review keeps everything aligned.

Does income protection follow you when you change jobs?

In most cases, yes. A standard income protection policy belongs to you, not your employer, so it stays in force when you move to a new role. You keep paying the premiums and the cover continues.

That is different from a salary continuance or group scheme arranged through an employer. Those typically end when you leave, because the employer owns the policy. If your cover came from a workplace scheme rather than a personal policy you took out yourself, it is worth confirming what happens when you leave before you assume you are still covered.

The thing to keep in mind is that "still in force" is not the same as "still accurate." A personal policy keeps running, but it was underwritten on the job, income and occupation you had when you applied. When those change, the policy does not automatically update. Whether a claim is paid depends on the terms, conditions, exclusions, stand-down periods and underwriting of the specific policy, and on your disclosure. This is a summary only — always read the policy wording.

What happens if your occupation class changed since you applied?

Occupation is one of the core factors insurers use to rate and underwrite income protection, so a change of occupation class after you applied can affect premiums, terms and how a claim is assessed ⁹. Insurers group jobs into classes broadly by physical risk and income stability — a desk-based professional sits in a lower-risk class than someone doing heavy manual or hazardous work.

If you move to a higher-risk occupation, the original terms may no longer match the work you actually do. In some cases that affects pricing; in others it can affect how the insurer views a claim. Moving to a lower-risk occupation sometimes works in your favour and may support a review of your premium. Either way, the policy was priced on the old occupation until the insurer is told otherwise.

We cover how insurers band different jobs in our guide to income protection occupation classes in NZ. The practical point is simple: if the nature of your work has shifted, the occupation recorded on your policy is worth checking.

How a pay change affects an indemnity policy at claim time

This is where the structure of your policy matters most. There are two common ways income protection is written, and a pay change affects them very differently.

An indemnity (loss-of-earnings) policy assesses your actual income at the time of claim. So a pay cut, a move to lower or variable self-employed income, or a gap in earnings after a job change can reduce the payout, even though your premiums were based on your earlier, higher income ⁸. You can end up paying for a level of cover the policy will not actually pay out at claim time.

An agreed value policy fixes the benefit when the policy starts, based on income you prove up front. At claim time the insurer pays the agreed figure regardless of what your recent earnings looked like. For people whose income moves around — which often includes those who have just gone self-employed — that certainty can matter a great deal.

Neither structure is automatically "better." Agreed value usually costs more and is harder to obtain than it once was, while indemnity is cheaper but exposed to income dips. The trade-offs are set out in our comparison of agreed value vs indemnity income protection. The point here is that if you are on an indemnity policy and your income has dropped, the cover you are paying for may be larger than the cover you would receive.

What changes when you go from employee to self-employed?

Going out on your own changes several things at once, and they tend to interact.

• Your occupation class may shift. Self-employment can change how an insurer views your work, particularly if the role itself is more hands-on than your old job ⁹.
• Your income becomes variable. New ventures often start with lower or lumpier earnings. On an indemnity policy, that variability can reduce what is paid at claim time ⁸.
• Your safety net changes. Employer sick leave disappears, and your ACC cover moves onto a self-employed footing that you arrange and pay for (covered further below) ³.
• Premium tax treatment can change. For some self-employed structures the treatment of income protection premiums differs from being an employee. Smiths Financial does not provide tax advice — this is general information only, so please consult an appropriately authorised professional on your specific situation.

None of these means your cover stops working. They mean the assumptions behind it are worth revisiting so the policy reflects how you now earn. Our self-employed financial checklist for KiwiSaver and ACC runs through the wider set of things that shift when you make the move.

How does losing employer sick leave affect your wait period?

The wait period (sometimes called the stand-down) is how long you are off work before an income protection benefit starts paying. A longer wait period generally means a lower premium, because you are self-funding the early weeks.

As an employee, a chunk of those early weeks is often covered by paid sick leave. New Zealand employees are entitled to a minimum of 10 days' paid sick leave a year after six months' continuous employment, under the Holidays Act ⁷. That paid leave is part of what makes a longer wait period workable for many employees.

Going self-employed removes that employer-provided sick leave, which is a common reason self-employed people look at a shorter wait period ⁷. With no sick leave behind you, the gap between stopping work and the benefit starting has to come from your own savings instead. The right wait period is the one your buffer can actually bridge — and that buffer changes when employer sick leave goes.

Do you need to tell your insurer when your work changes?

Insurers' disclosure obligations — including the duty to disclose material changes — sit within the conduct framework overseen by the Financial Markets Authority ⁹. In practice, policies differ on exactly what they ask you to notify and when, so the honest answer is: it depends on the wording, and the wording is what governs.

Some policies require you to advise the insurer of a change in occupation. Others assess occupation at claim time. Because the consequences of getting this wrong can include a declined or reduced claim, the safe approach is to check what your specific policy requires rather than assume. Material changes worth raising in a review include:

• A change of occupation or occupation class
• A move from employee to self-employed (or contractor)
• A meaningful change in income, up or down
• Taking on noticeably riskier duties

A review is the natural moment to confirm what your insurer needs to know and to put it in writing. To get advice tailored to your circumstances, book a conversation.

How does ACC cover change when you become self-employed?

ACC is the accident layer that sits alongside income protection, and it changes shape when you become self-employed.

As an employee, if a covered injury stops you working, ACC weekly compensation pays up to 80% of your pre-injury gross weekly earnings ¹. ACC does not pay for the first 7 calendar days after an injury — for a work injury your employer must pay 80% for that first week, and for a non-work injury you use leave, with ACC weekly compensation starting from day 8 ².

When you go self-employed, you are automatically placed on ACC CoverPlus, which bases weekly compensation on your most recently completed tax return (up to 80% of income). You can instead choose CoverPlus Extra (CPX), where you agree a fixed level of cover in advance and ACC pays 100% of that agreed amount regardless of recent earnings ³. For the 1 April 2024 to 31 March 2025 year, the CPX agreed cover could be set between a minimum of $39,492 and a maximum of $122,232 ⁴.

Two cost points matter once you are self-employed. ACC levies are no longer deducted through PAYE — you pay them directly. The earners' levy rate for the 2024/25 year was 1.60% ($1.60 per $100 of liable earnings) ⁵, applied to earnings up to $142,283, giving a maximum earners' levy of $2,276.52 ⁶. Income above that cap is not levied — and ACC weekly compensation is capped correspondingly, which is part of the gap personal income protection can fill. Figures are correct as at 5 February 2025; ACC levy rates and CPX bands change each year, so check current figures at acc.co.nz.

It is worth keeping the two clear in your mind: ACC covers injury but generally not illness; income protection can cover both, subject to its terms. A change in your ACC setup does not change what your income protection policy does, and vice versa.

What to review on your cover after any work change?

The figure below maps common work changes to the parts of your cover worth checking. It is illustrative — your own policy wording and circumstances determine what actually applies.

Source: Illustrative.

The pattern is consistent: a work change rarely breaks the policy, but it often dates the assumptions it was built on. Reviewing occupation, income, wait period and the ACC setup together keeps the cover matched to how you now work.

Frequently asked questions

Does my income protection stop when I leave my job? A personal policy you took out yourself generally stays in force when you change jobs — it belongs to you, not your employer. Cover provided through an employer (such as a group salary continuance scheme) usually ends when you leave, because the employer owns it. If your cover came from a workplace scheme, confirm what happens before assuming you are still covered.

I went self-employed but kept the same policy. Is anything different? The policy can keep running, but several assumptions behind it may have changed: your occupation class, your income level and variability, your ACC setup, and the loss of employer sick leave ³⁷⁹. On an indemnity policy in particular, lower or variable self-employed income can reduce what is paid at claim time ⁸. A review checks the cover still matches how you now earn.

Will a pay cut reduce my income protection payout? On an indemnity (loss-of-earnings) policy it can, because the benefit is assessed against your actual income at the time of claim ⁸. An agreed value policy fixes the benefit up front and pays that figure regardless of recent earnings, though it usually costs more. Which structure you are on determines the answer.

Do I have to tell my insurer I changed occupation? It depends on your policy wording, which is what governs. Some policies require you to notify a change of occupation; others assess occupation at claim time ⁹. Because getting it wrong can affect a claim, the safe approach is to check what your specific policy requires rather than assume.

How does ACC change when I become self-employed? You move from your employer's arrangements onto ACC CoverPlus by default — based on your last tax return, up to 80% of income — or you can choose CoverPlus Extra and agree a fixed level of cover in advance ³. You also pay ACC levies directly rather than through PAYE ⁵. ACC covers injury, not illness, so income protection still has a distinct role.

Craig Smith Business Services Ltd (FSP712931), trading as Smiths Financial, holds a Class 2 licence issued by the Financial Markets Authority to provide financial advice. Smiths Financial provides advice about personal risk insurance, health insurance, general insurance, KiwiSaver, and managed funds. We are members of the Financial Dispute Resolution Service (FDRS). We're generally paid by commission from the insurer or provider when you take out a policy through us; this doesn't change the premium you pay. We manage any conflicts of interest in line with our duty to prioritise your interests — full details in our Disclosure. Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 5 February 2025.