Off Work Due to Illness, Not Injury: What Actually Pays Your Income in NZ (2026)

ACC covers accidents, not illness — yet illness causes most long-term absences. Here is how fast NZ households run out after sick leave, and what actually replaces the income.

Most New Zealanders assume ACC has them covered if they cannot work. It does — but only if the reason is an accident. Cancer, a heart attack, a stroke, a mental-health breakdown? ACC pays nothing for those. And those are exactly the conditions that keep people off work the longest.

This guide explains why illness leaves the biggest hole in a household budget, how quickly the money runs out, and which four products actually replace the income.

TL;DR: ACC covers personal injury from accidents only — it pays $0 for illness such as cancer, heart disease, stroke or mental illness ¹. Illness, not injury, causes most long-term work absences ². After your 10 days of paid sick leave run out ⁵, only private or group income protection (around 75% of income) reliably replaces a lost wage ¹⁰.

Why do most long-term work absences get zero from ACC?

ACC is built around one trigger: a personal injury caused by an accident. If you slip off a ladder, crash your bike, or rupture a tendon at the gym, ACC steps in and pays weekly compensation of up to 80% of your pre-injury income ³.

But ACC explicitly does not cover illness, disease, or medical conditions that develop without an identifiable accident. Cancer, heart disease, stroke and mental illness all fall outside the scheme. For these, ACC pays nil ¹. (There are narrow exceptions — ACC does cover some treatment injuries and certain work-related occupational diseases — but a typical illness with no accident behind it is not covered.)

That matters because the majority of people who are off work long-term are dealing with an illness, not an injury ². Accidents tend to be acute and recoverable. Illness — particularly for desk-based and light-duty workers — is statistically more likely to cause a long absence ². So the country's most generous safety net misses the most common reason people stop earning.

Even on the accident side, ACC has limits. There is a one-week stand-down before weekly compensation starts, the payments are taxable, and the weekly amount is capped at $2,418.55 per week from 1 July 2025 ³. That cap corresponds to maximum insurable earnings of roughly $157,000 a year, so anyone earning above that does not get a full 80% replacement even for an accident ³.

How long would your household last after sick leave runs out?

NZ employees are legally entitled to a minimum of 10 days of paid sick leave a year, available after six months' continuous employment ⁵. Unused sick leave carries over and accumulates to a cap of 20 days ⁶. For a serious illness, 10 days is two working weeks. That is the runway before your own savings have to take over.

The picture after that is sobering.

How fast NZ households run out after leave is exhausted

Source: Financial Services Council "Money and You" household resilience research, reported via MoneyHub NZ ¹¹.

By the four-week mark, more than half of New Zealand households say they could not cope financially. A cancer diagnosis or a cardiac event does not resolve in four weeks — it commonly means months off work. The gap between two weeks of sick leave and six months of treatment and recovery is where the financial pressure builds.

People who have never claimed on ACC often assume it would cover them in any situation, when in fact it only covers accidents.

What stops paying when your income stops?

When the wage stops, the bills do not. Here is what keeps demanding money, and what quietly stops working in your favour.

Rent or mortgage

Your single largest commitment does not pause for illness. The bank still expects the mortgage; the landlord still expects the rent. Neither is reduced because you are in chemotherapy. This is the cost that pushes households over the edge fastest in the table above.

KiwiSaver contributions

If you stop earning, your member contributions stop. Because the employer contribution is tied to your pay, that stops too — and so does the government contribution, which only pays 25 cents for every $1 you put in ⁶. No wage means no contributions from any of the three sources. Your retirement saving freezes at the worst possible time. (More on this below.)

Levies, rates and fixed costs

ACC levies, council rates, insurance premiums, power and broadband all keep arriving on the same schedule. These fixed costs are immune to your health. A household that loses 100% of its income — which is what an illness does, once sick leave is gone — still faces close to 100% of its outgoings.

The four products that can replace illness income — and which fits

ACC is off the table for illness, so replacing the income falls to private cover or your own savings. Four products do real work here.

The standout for illness is income protection, because it is the only product designed to replace a lost wage for as long as you cannot work — not for a fixed 12 months. Individual income protection is commonly benchmarked at 1–3% of annual income for basic cover, with premiums driven by age, occupation, health, your waiting period, your benefit period, and whether the policy is indemnity or agreed-value. Group cover, where an employer offers it, replaces up to 75% of pre-disability income and, unlike ACC, covers illness as well as injury ¹⁰.

Not sure how big the hole would be in your own budget? Our income-protection needs calculator gives you a quick household-runway estimate — how long your savings and sick leave would last, and roughly how much monthly cover would replace your wage — before you talk to anyone.

The two levers that change both price and usefulness most are the waiting period (how long before it starts paying) and the benefit period (how long it keeps paying). Getting those two right for your household is the heart of the advice — see how the waiting period works and our income protection service.

Income protection vs a savings buffer: where each wins

This is not an either/or. They do different jobs.

A savings buffer wins on speed and flexibility. There is no wait period, no underwriting, no claim form. If you have three to six months of expenses set aside, that buffer covers the income protection waiting period beautifully — and choosing a longer waiting period in exchange for a lower premium is one of the smartest moves available to a household with savings.

Income protection wins on duration and scale. A serious illness can mean 12, 24 or 36 months off work — sometimes longer. No realistic savings buffer survives that. A policy that pays to age 65 does. The sensible structure for most households is a buffer to bridge the wait period, then income protection to carry the long tail of a genuine illness. Savings handle the shock; insurance handles the marathon.

A quick worked example

Scenario: Mere earns $90,000 and is diagnosed with cancer needing nine months off work.

The headline rate is $5,625 a month (75% of $90,000). But income protection pays nothing during the waiting period — so with a four-week stand-down, Mere is covered for roughly eight of the nine months, landing near $45,000–46,000 rather than the full $50,625 the rate alone implies. That is the trade-off behind choosing a waiting period: the savings buffer has to carry those first weeks. Either way, roughly three-quarters of the wage keeps flowing once cover starts — the difference between keeping the house and refinancing it under pressure.

What happens to your KiwiSaver contributions when you stop earning?

When illness stops your pay, your KiwiSaver effectively goes quiet — and a few 2026 changes make that worth understanding.

The default minimum contribution rate (employee and employer) rises from 3% to 3.5% on 1 April 2026, then to 4% on 1 April 2028 ⁸. Members can temporarily opt back down to 3% if money is tight — useful to know if you are returning to work after illness on reduced hours.

The government contribution was halved from 1 July 2025: it is now 25 cents per $1 you contribute (down from 50 cents), and members earning over $180,000 are no longer eligible ⁶. Note too that the employer contribution your KiwiSaver receives is taxed before it lands, via employer superannuation contribution tax (ESCT) ¹² — another reason the employer top-up shrinks the moment your pay stops.

One point to watch: employer and past government contributions do not count toward the $1,042.86 threshold — only your own money does ⁷. So if illness stops your pay partway through the KiwiSaver year, you may fall short of the threshold and miss part of the $260.72 top-up. An interruption to your income mid-year is a common reason people end up short of the full government contribution.

If you have headroom, you can make a voluntary lump-sum contribution before 30 June to reach $1,042.86 and still claim the full top-up, even in a year where your salary contributions were interrupted. While you are reviewing this, two other settings are worth a check: your PIR (the tax rate on your KiwiSaver growth) and your fund choice with providers like Simplicity, Milford, Generate, Booster, Kernel or Fisher Funds.

What PIR should you be on?

Your Prescribed Investor Rate sets the tax on KiwiSaver returns. The tiers are 10.5%, 17.5% and 28% ⁹. If illness drops your taxable income for a year, your correct PIR may fall too — and being on the wrong rate means over- or under-paying tax on your KiwiSaver growth.

A lower-income year caused by illness is a classic moment to check your PIR. A quick KiwiSaver review catches it.

Your checklist if a serious illness took you off work tomorrow

01. Count your runway. Add up paid sick leave (max 10 days ⁵) plus accessible savings, and divide by your monthly outgoings. That number is how long you have before there is a problem — our income-protection needs calculator does the maths for you.

02. Confirm ACC does not apply. If the cause is illness, not an accident, expect $0 from ACC ¹. Do not wait to find that out at claim time.

03. Check whether you have group income protection. Many employees do not know if their employer offers it, or what it pays. If it does, confirm the percentage, the stand-down, and the benefit period.

04. Review your individual income protection. Check the waiting period, the benefit period, and whether it is indemnity or agreed-value — these decide what actually lands in your account.

05. Protect the mortgage first. It is the cost that sinks households fastest. Make sure something covers it.

06. Sort your KiwiSaver before 30 June. If pay stopped mid-year, consider a voluntary top-up to reach $1,042.86 and claim the full $260.72 ⁷, and confirm your PIR still matches your reduced income ⁹.

07. Get a second opinion. Have an independent adviser review the whole picture against a realistic illness scenario.

Book a free review to run this checklist with an adviser.

Frequently asked questions

Does ACC cover me if I cannot work because of illness? No. ACC covers personal injury caused by an accident only. For illness such as cancer, heart disease, stroke or mental illness — which develop without an identifiable accident — ACC pays nothing ¹. Illness, not injury, causes most long-term work absences ², which is the core reason income protection exists.

How much paid sick leave am I entitled to in NZ? Employees are legally entitled to a minimum of 10 days of paid sick leave a year after six months' continuous employment ⁵. Unused leave carries over and accumulates to a cap of 20 days ⁶. For a serious illness, 10 days is roughly two working weeks of cover.

How quickly do NZ households run out of money after sick leave ends? According to Financial Services Council household resilience research reported via MoneyHub NZ, about 20% of households cannot cope after one week, 34% by two weeks, and 55% by four weeks once paid leave is exhausted ¹¹. A serious illness usually means months off work, well beyond that point.

What percentage of my income does income protection replace? Group income protection typically replaces up to 75% of pre-disability income after a stand-down period, and unlike ACC it covers illness as well as injury — paying until you return to work, reach age 65, or the benefit period ends ¹⁰. Individual cover is commonly benchmarked at around 1–3% of annual income in premiums.

What happens to my KiwiSaver if my income stops? Your member contributions stop, which means the employer contribution and the government contribution stop too — the government only pays 25 cents for every $1 you contribute ⁶. You can make a voluntary contribution of up to $1,042.86 before 30 June to still claim the full $260.72 government contribution for the year ⁷.

Should I lower my KiwiSaver PIR if illness cuts my income? Possibly. The PIR tiers are 10.5%, 17.5% and 28%, set by your taxable income (10.5% up to $15,600; 17.5% up to $53,500; 28% otherwise) ⁹. A low-income year caused by illness may lower your correct rate — and being on the wrong PIR means over- or under-paying tax on your KiwiSaver growth.

General information, not personalised financial advice. Seek advice tailored to your situation before acting. 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). Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 16 June 2026.