Income Protection for Mental Health and Stress Claims in NZ (2026): What's Covered and What's Excluded

Does income protection cover mental health, stress, anxiety or burnout in NZ? A plain guide to what insurers pay, the exclusions and sub-limits to watch, why ACC rarely helps, and how a mental-health claim is assessed.

Mental-health conditions are now a common reason people take extended time off work, and a common reason they ask whether their income protection would actually pay. The honest answer is: it depends on the policy and on the evidence. Some income protection policies cover mental-health conditions in full, some apply limits, and ACC will rarely help at all. This article sets out how that works in plain terms, so you can understand your own cover before you ever need to rely on it.

TL;DR: Income protection in New Zealand can cover mental-health conditions such as anxiety and depression, but ACC almost never does, only about 0% of work stress or gradual-process mental injury qualifies for ACC cover ¹. A claim needs a formal clinical diagnosis, not just "stress" or burnout ⁷. Many insurers apply mental-health exclusions or limited benefit periods, so the wording matters.

Does income protection cover mental health conditions in New Zealand?

It can, and this is one of the clearest reasons private income protection is broader than ACC. ACC covers injury, not illness, so it generally pays nothing for mental-health conditions on their own ¹. Private income protection is built to cover an inability to work caused by illness as well as injury, and mental-health conditions sit on the illness side ⁴.

That said, "can cover" is not the same as "always covers". Mental-health cover under income protection is shaped by three things: the policy wording, any exclusions applied to you when the policy was issued, and the medical evidence at claim time. Some policies treat a properly diagnosed mental-health condition the same as any other illness. Others limit how long they will pay for it, or exclude it entirely if you have a relevant history. The differences between insurers here are real, which is why the exact wording is worth reading before you take a policy, not after.

To set the scale of this: in the Ministry of Health's 2023/24 New Zealand Health Survey, 13.0% of adults reported high or very high psychological distress in the previous four weeks (15.5% of women, 10.2% of men), a statistically significant long-term increase ⁵. Stats NZ's Wellbeing Statistics 2023 found 26% of people aged 15+ had poor mental wellbeing on the WHO-5 measure ⁶. Mental health is not a fringe risk to income, and good cover treats it accordingly.

Is 'stress' or burnout enough to claim, or do you need a diagnosis?

Stress and burnout, on their own, are usually not enough. Income protection pays when you are unable to work because of a covered illness or injury, and a covered mental-health claim almost always rests on a formal clinical diagnosis by a qualified practitioner, not a self-reported feeling of being overwhelmed ⁷.

This is the same threshold ACC applies on its side. ACC requires a clinically significant behavioural, cognitive or psychological dysfunction, diagnosed by qualified assessors, before mental injury cover is even considered ⁷. "I'm burnt out" describes a real and serious experience, but it is not, by itself, a claimable diagnosis. A diagnosis such as major depressive disorder or a recognised anxiety disorder, supported by treatment and a practitioner's assessment that you cannot perform your occupation, is what an income protection assessor looks for.

So the practical sequence for most people is: see your GP, get a proper assessment, follow treatment, and have a practitioner document that you are unable to work. Time off that is documented only as "stress leave" with no underlying diagnosis is the weakest position to claim from.

Why won't ACC usually pay for mental illness without a physical injury?

Because ACC is an accident scheme, and the law sets a narrow path for mental injury. ACC cannot provide cover for mental injury caused by stress or other gradual processes at work, such as bullying or cumulative pressure ¹. In practice that means roughly 0% of ordinary work-stress claims meet ACC's test.

ACC will only consider a work-related mental injury where it is a clinically significant dysfunction caused by a single, sudden traumatic event in the workplace that the person directly experienced, where that event could reasonably be expected to cause mental injury to people generally (and, for the work-trauma pathway, occurred after 1 October 2008) ². Outside work, ACC can also cover mental injury that flows from a covered physical injury, a treatment injury, or sexual abuse or assault (sensitive claims) ¹. Gradual burnout, anxiety building over months, or depression without a qualifying event sit outside all of those.

Sources: ACC mental-injury rules and insurer PDS norms; illustrative ¹²⁴⁷.

This is the gap our companion guide on being off work for illness, not injury walks through in more detail, and it is the same reason we explain elsewhere that ACC is not income protection.

What mental-health exclusions and sub-limits do NZ insurers apply?

This is where policies diverge, and where reading the wording earns its keep. Common approaches include:

• Full cover: the mental-health condition is treated like any other illness, with the policy's standard benefit period.
• Limited benefit period: the policy pays for a mental-health claim for a capped time (for example, a set number of months or up to two years), even where physical conditions are paid to age 65.
• Individual exclusion: if you have a relevant history, the insurer may apply a specific mental-health exclusion to your policy at the outset, so claims arising from that are not covered.
• Standard exclusions: most policies exclude self-inflicted injury and conditions arising from things like substance abuse; these apply regardless of mental-health status.

None of these is unusual or hidden by intent, but they vary by insurer and by the cover you were offered, and they change what a claim is worth. Two policies that look identical on price can pay very differently on a depression claim if one caps the benefit at two years and the other does not. Because every benefit has a matching condition, it is worth confirming, in writing, exactly how your policy handles mental health before you rely on it.

Whether a mental-health claim is paid ultimately depends on the terms, conditions, exclusions, stand-down periods and underwriting of your specific policy, and on the disclosure you gave when you applied. This article is a summary only; always read the policy wording or product disclosure statement.

How do limited benefit periods for mental health work?

A benefit period is how long a policy keeps paying once a claim is accepted. On many income protection policies the benefit period for physical conditions can run for two or five years, or all the way to age 65 or 70. Some insurers apply a shorter benefit period to mental-health claims specifically.

In practice that can mean a policy pays a depression or anxiety claim for, say, up to 24 months, then stops, even though the same policy would pay a physical disability to retirement age. If your time off is short, a limited period may never bite. If a condition keeps you off work for years, the difference between a capped mental-health benefit and a full one is significant.

There is no single market rule here, the cap (or absence of one) is a feature of each insurer's wording. Knowing which applies to you is part of understanding what you have actually bought. This sits alongside the wider question of how health, trauma and income cover fit together, which we cover in health vs trauma vs income protection.

Will a history of anxiety or depression affect your application?

It can, and it is best to expect questions rather than be surprised by them. Insurers underwrite mental health much as they do any other condition: they ask about your history, and they decide how to offer cover based on the answers.

Possible outcomes range from standard cover, to cover with a mental-health exclusion, to a loading, to a request for more information from your GP. A past episode that was mild, treated and well in the past is viewed differently from an ongoing or recent condition. The key point for applicants is disclosure: answer the questions fully and accurately. Non-disclosure is one of the most common reasons claims are later declined, because the insurer was not given the chance to assess the risk it agreed to cover.

ACC's approach to history is instructive here too: it does not cover pre-existing mental-health conditions, nor a condition where the event was only a trigger or "final straw" ⁸. Private insurers are more flexible than ACC, but a relevant history still shapes the terms you are offered, which is exactly why it pays to get the application right the first time.

What does the medical evidence for a mental-health claim look like?

A mental-health claim is evidenced much like any illness claim, with the emphasis on a documented diagnosis and a clear link between the condition and your inability to work. Typically an assessor will look for:

• A formal diagnosis from a GP, psychiatrist or psychologist, using recognised criteria ⁷.
• A record of ongoing treatment, such as appointments, therapy or prescribed medication.
• A practitioner's assessment that you are unable to perform your occupation (the test depends on whether your cover is own-occupation or any-occupation).
• Continuity of evidence over the stand-down and benefit period, not just a single note.

The stronger and more consistent this trail is, the more straightforward the claim. This is the practical reason "stress leave" with no diagnosis is a weak footing: there is little for an assessor to verify. ACC applies the same logic on its side, requiring the injury to be diagnosed as clinically significant and to be a meaningful cause, not incidental ⁷.

How do you protect your income against mental-health time off?

There is no single answer, because the right structure depends on your occupation, your finances and the cover available to you. But the levers people commonly weigh up are:

• The mental-health terms specifically: is the condition covered in full, or is there a limited benefit period or exclusion? This is the single most important thing to check.
• The benefit period: a longer benefit period costs more but protects against a long absence; a shorter one is cheaper but caps your exposure.
• The wait (stand-down) period: matching it to your savings buffer and sick-leave entitlement can lower the premium.
• Own-occupation vs any-occupation definitions, which change when a benefit is payable.

Income protection covers up to around 75% of gross income for a covered inability to work, and unlike ACC it can extend to illness and mental-health conditions ^{4 3}. ACC weekly compensation, where it applies at all, replaces up to 80% of pre-injury earnings, but only for covered injuries, not for stress or most mental illness ^{3 1}. The two are not interchangeable.

People in this situation often find the most useful first step is simply to read their existing wording with someone who can interpret it, so they know where they stand before a claim, not during one. To get advice tailored to your circumstances, book a conversation.

Frequently asked questions

Does income protection cover mental health in NZ? It can. Private income protection is designed to cover an inability to work caused by illness as well as injury, and properly diagnosed mental-health conditions sit on the illness side ⁴. Whether a specific claim is paid depends on the policy wording, any exclusions applied to you, and the medical evidence. Some policies cover mental health in full; others apply a limited benefit period or an exclusion, so the wording matters.

Will income protection pay for stress or burnout? Stress or burnout on its own is usually not enough. A claim generally needs a formal clinical diagnosis from a qualified practitioner, together with evidence that you cannot perform your occupation ⁷. "Stress leave" documented without an underlying diagnosis is the weakest basis to claim from.

Does ACC cover mental health in New Zealand? Rarely. ACC cannot cover mental injury caused by stress or gradual processes at work, so roughly 0% of ordinary work-stress claims qualify ¹. It may cover mental injury linked to a covered physical injury, a single sudden traumatic work event, a treatment injury, or sexual abuse or assault ^{1 2}. Burnout, anxiety or depression without a qualifying event generally fall outside ACC.

Can a history of anxiety or depression stop me getting cover? Not necessarily, but it shapes the terms. Insurers may offer standard cover, cover with a mental-health exclusion, a loading, or request more information ⁸. A mild, treated and historic episode is viewed differently from an ongoing one. Answer all application questions fully, as non-disclosure is a common reason claims are later declined.

What is a limited benefit period for mental health? It is a cap on how long a policy will pay a mental-health claim, for example up to two years, even where the same policy would pay a physical condition to age 65 ⁴. Not every insurer applies one. Knowing whether your policy caps mental-health benefits is part of understanding what you have bought.

How is a mental-health income protection claim assessed? Assessors look for a formal diagnosis using recognised criteria, a record of ongoing treatment, and a practitioner's assessment that you cannot perform your occupation, with consistent evidence over the claim ⁷. The stronger and more continuous that trail, the more straightforward the claim.

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. 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 or product disclosure statement. 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 on personal risk insurance, health insurance, general insurance, KiwiSaver and managed funds, and is a member of the Financial Dispute Resolution Service (FDRS). We're generally paid by commission from the insurer or provider when you take out cover through us; this doesn't change the premium you pay, and 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 3 October 2025.