Locum Cover for NZ Health and Trade Professionals: How It Works

If you run a solo practice, locum cover funds a replacement so revenue keeps flowing while you recover. Here is how it works in NZ, and how it differs from income protection.

If you are the only practitioner in your practice, your income and your patients both depend on you turning up. When illness or injury stops you working, your own income is one problem — but so is the practice itself, which still has to see clients, keep the doors open and meet its overheads. Locum cover is the piece of the puzzle that funds a replacement practitioner so the work, and the revenue, can continue while you recover.

This guide explains what locum cover does, how it differs from income protection, and how the two fit alongside ACC and business expenses cover for a solo GP, dentist, vet or physio in New Zealand.

TL;DR: Locum cover pays for a replacement practitioner so your practice keeps running while you cannot work. It is different from income protection, which replaces your income. ACC covers injury only, not illness ¹, so a sole practitioner's practice revenue is exposed when they are unwell. Premiums are generally deductible and the benefit generally taxable ⁷.

What is locum cover and who needs it?

Locum cover (sometimes written into a policy as a "locum benefit" or "additional benefit") is insurance that reimburses the cost of hiring a temporary replacement practitioner — a locum — when the insured person cannot work because of illness or injury. Instead of paying money to you, it pays towards the cost of keeping your practice delivering services.

It is most relevant to professionals whose practice revenue depends heavily on one person being present. That commonly includes:

• Solo GPs and other medical specialists running their own rooms
• Dentists operating a single-chair or owner-operated practice
• Veterinarians in a small or single-vet clinic
• Physiotherapists, chiropractors and similar allied-health practitioners working for themselves

The common thread is that the business cannot simply pause. Patients still need to be seen, appointments are already booked, and fixed costs keep running whether or not the principal is at work. A locum lets the practice keep treating clients and billing for that work while the owner is away recovering.

It is worth being clear about what locum cover does not do: it is not a substitute for replacing your personal income, and it does not pay out regardless of whether a replacement is engaged. It is generally tied to the actual cost of a locum, up to the limits in the policy.

How is locum cover different from income protection?

This is the distinction that trips people up, because both respond when you cannot work. The difference is who the money is for.

• Income protection replaces a portion of your own income — typically a monthly benefit while you are unable to work due to illness or injury. The money is for you and your household.
• Locum cover reimburses the cost of a replacement practitioner so the practice keeps operating. The money is for the business, to keep revenue and patient care continuing.

A solo practitioner often needs both, because they address different problems. Income protection looks after you. Locum cover (and business expenses cover) look after the practice. The table below sets the two side by side.

Locum cover vs income protection for a solo practice

Source: insurer PDS comparison, 2026. Structures and limits vary between insurers — always read the specific policy wording.

Because the two cover different things, they do not usually duplicate each other. A sensible plan often pairs income protection (for your income) with locum cover and business expenses cover (for the practice). An adviser can structure these so they work together rather than overlap.

How does it keep a solo practice running while you recover?

When a covered illness or injury stops the principal working, the practice still faces two pressures at once: it cannot earn from the principal's billings, and its fixed costs keep accruing. Locum cover addresses the first of those by funding someone to step in and do the billable work.

In practice, that means:

• The practice engages a locum to see patients or clients
• The policy reimburses the locum's cost, up to the weekly or monthly cap and the maximum number of weeks in the policy
• Revenue from the work the locum performs continues to flow into the practice

This is also why locum cover often pairs naturally with business expenses cover (also called business overheads cover), which reimburses the practice's ongoing fixed costs — rent, power, practice software, support staff wages and similar — while the principal is off work. One keeps the work happening; the other keeps the lights on. We cover the overheads side in detail in our guide to business overheads and expenses cover.

Whether any particular claim is paid depends on the policy terms, so it is worth understanding the stand-down, the documentation a claim needs, and any conditions before relying on it.

How much locum cover should a GP, dentist, vet or physio hold?

There is no single right number, because the appropriate level depends on what a replacement actually costs and how much of the practice's revenue rests on the principal. Factors that practitioners in this situation commonly weigh up include:

• The going rate for a locum in their field and region, which sets the weekly cost the cover needs to meet
• How many hours the practice would need a locum to work to keep services running
• How long a serious illness or injury might keep them away, which informs the maximum benefit period
• Existing cover already in place, so they are not paying twice for the same risk

A useful way to think about it is to start from the realistic weekly cost of a locum who could keep the practice functioning, then choose a weekly limit and a maximum number of weeks that would carry the practice through a meaningful absence. Setting the limit too low leaves a shortfall the practice has to fund itself; setting the maximum weeks too short can leave a gap during a long recovery.

This is exactly the kind of sizing that benefits from advice tailored to your circumstances, because it depends on your practice's economics, not a rule of thumb.

What wait and benefit periods suit a professional practice?

Two settings shape how locum cover behaves: the wait period (how long after you stop working before the benefit starts) and the benefit period (the maximum number of weeks it will keep paying).

For a practice, the considerations differ from personal income protection:

• Wait period. A practice's revenue problem starts almost immediately, so locum benefits often use a shorter wait than personal income protection. A shorter wait means the reimbursement starts sooner, but generally costs more.
• Benefit period. This is usually expressed as a maximum number of weeks of locum cost the policy will meet within a claim. A longer maximum protects against a drawn-out recovery; a shorter one keeps the premium down but risks the cover running out before you are back.

There is a genuine trade-off here. A short wait and a long benefit period give the most protection but cost the most; a longer wait and shorter benefit period cost less but leave more for the practice to absorb. The right balance depends on how much the practice could self-fund and for how long. These settings vary between insurers, so it is worth comparing wordings rather than assuming they are standard.

Is it available as a standalone policy or an add-on in NZ?

In the New Zealand market, locum-style cover is commonly offered as a benefit attached to a business protection policy — most often as part of, or an option alongside, business expenses (overheads) cover — rather than as a widely sold standalone product. Some insurers include a locum reimbursement within their business expenses cover; others offer it as a specific add-on for relevant occupations.

Because the structure varies, the practical question is less "standalone or add-on" and more "what does this specific policy actually reimburse, up to what limit, and for how long". Two policies that both mention a locum benefit can behave quite differently at claim time. The terms, conditions, exclusions, stand-down periods and underwriting of the specific policy, along with your disclosure, determine whether and how much is paid — this is a summary only, so always read the policy wording or product disclosure statement.

We work with a panel of selected insurers, listed in our disclosure, and can compare how each treats locum and overheads cover for your occupation. Not every provider in the market is shown in any single comparison, and each has its own PDS worth reading.

How does it work with ACC and with business expenses cover?

This is where a lot of solo practitioners are exposed without realising it. ACC provides no-fault cover for injury only — treatment, rehabilitation and weekly compensation — and does not cover loss of earnings caused by illness or sickness ¹. So if you are unwell rather than injured, ACC does not respond, and your practice's revenue is exposed.

It helps to be precise about what ACC does and does not do for the self-employed:

• Standard ACC CoverPlus pays self-employed people weekly compensation of up to 80% of the previous year's liable earnings for a covered injury, with payments starting after a one-week stand-down ².
• ACC CoverPlus Extra (CPX) lets you agree a fixed level of cover in advance and pays 100% of that agreed amount (less tax) for a covered injury, with no need to prove lost income at claim time ³. For the ACC year 1 April 2024 to 31 March 2025, the agreed cover band ran from $34,679 to $111,507 ⁴.
• ACC also caps weekly compensation. For the 2024/25 levy year the maximum gross weekly compensation was $2,350.62 (about $122,300 of liable income a year), so higher-earning GPs, dentists and vets can face a gap above the cap even for injury ⁵.

Two things follow from this. First, every one of those ACC figures is injury only — none of it responds to illness. Locum cover and income protection are the products that can respond to illness, which is the larger share of what keeps people off work. Second, even for injury, ACC pays you (and it is taxable, with PAYE deducted before payment ⁶) — it does not fund a replacement practitioner to keep your practice billing.

That is why the cleaner way to think about it is by role, not by product:

Source: ACC and insurer PDS comparison, as at 20 March 2025 ¹²³.

For the illness side of personal income specifically, our guide on income for illness, not just injury explains where ACC stops and private cover begins, and our income protection for contractors guide covers the offset structures that keep you from paying twice on the accident side.

Is the premium deductible and the benefit taxable?

For cover that protects a business's revenue or meets its operating costs — which is what locum cover and business expenses cover are designed to do — the general position under Inland Revenue's revenue test for business expenses is that the premium is deductible and the benefit is taxable ⁷. In other words, you can usually claim the premium as a business expense, and the reimbursement you receive is generally treated as taxable income.

A few related points are worth knowing:

• Where a practice is run through a company, company profits are taxed at 28% ⁸. Where a taxable benefit is paid to an individual, the personal rates apply — 33% on income between $70,000 and $180,000, and 39% on income over $180,000 ⁹.
• If you are GST-registered, you can generally claim back the GST portion of ACC CoverPlus Extra levies, with GST charged at the standard rate of 15% ¹⁰.
• Locum cover's tax treatment is the mirror image of most personal lump-sum cover (such as trauma), where the benefit is usually tax-free and the premium is not deductible. Getting the structure right matters, and it is worth confirming with your accountant for your specific setup.

Smiths Financial does not provide tax or accounting advice. This is general information only — please confirm the tax treatment of your particular arrangement with an appropriately authorised tax professional.

Frequently asked questions

What is locum cover and how does it work? Locum cover is insurance that reimburses the cost of hiring a temporary replacement practitioner when the insured person cannot work due to illness or injury. It pays towards keeping the practice running — seeing patients and earning revenue — rather than replacing your personal income. The amount, wait period and maximum weeks depend on the specific policy ⁷.

Is locum cover the same as income protection? No. Income protection replaces a share of your own income while you cannot work. Locum cover reimburses the cost of a replacement practitioner so the practice keeps operating. A solo practitioner often holds both, because they cover different things — you and your household on one side, the practice on the other.

Does ACC cover me if I get sick rather than injured? No. ACC provides cover for injury only — treatment, rehabilitation and weekly compensation — and does not cover loss of earnings caused by illness ¹. For a sole practitioner, that leaves both your personal income and your practice's revenue exposed when you are unwell. Income protection, locum cover and business expenses cover are the products that can respond to illness, subject to their terms.

Can I get locum cover as a standalone policy in NZ? Usually it is offered as a benefit attached to, or an option alongside, business expenses (overheads) cover, rather than as a widely sold standalone product. Some insurers build a locum reimbursement into their business expenses cover; others offer it as an add-on. The practical question is what a specific policy reimburses, up to what limit, and for how long — always read the policy wording ⁷.

Is the premium for locum cover tax-deductible? Generally yes. Because locum cover protects business revenue, the premium is generally deductible as a business expense and the benefit is generally taxable, under Inland Revenue's revenue test ⁷. This is the opposite of most personal lump-sum cover. Confirm the treatment for your structure with your accountant.

How much locum cover should I hold? It depends on the realistic weekly cost of a locum who could keep your practice running, how long an absence you want to plan for, and what cover you already have. Setting the weekly limit too low leaves a shortfall; setting the maximum weeks too short can leave a gap during a long recovery. This is best sized with advice tailored to your practice.

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. Craig Smith Business Services Ltd (FSP712931), trading as Smiths Financial, holds a Class 2 licence issued by the Financial Markets Authority and is a member of the Financial Dispute Resolution Service (FDRS). Whether a claim is paid depends on the terms, conditions, exclusions, stand-down periods and underwriting of the specific policy, and on your disclosure — always read the policy wording or product disclosure statement. We're generally paid by commission from the insurer when you take out a policy 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. Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 20 March 2025.