Mental health conditions have become a leading cause of income protection insurance claims in New Zealand, with new analysis indicating they now account for nearly one in three claims and a higher share of insurers’ overall claims exposure.
Personal finance research website MoneyHub analysed income protection claims from one of New Zealand’s largest independent insurance advisers for the 12 months to December 2025, supplemented with industry data. The review found mental health conditions represented 32% of all income protection claims, compared with an estimated industry benchmark of around 20%. Conditions grouped under mental health included depression, anxiety, burnout, stress-related disorders, and post‑traumatic stress disorder among working-age customers who were temporarily unable to work. Musculoskeletal issues remained the largest single cause of claims at 38%, including back injuries, fractures, joint problems, and workplace accidents. The increased share of mental health-related claims is affecting the mix of morbidity experience across occupations and age groups, adding to the clinical and occupational factors advisers and insurers monitor.
The analysis showed that a typical income protection claim lasted four to six months. Claims arising from cancer diagnoses and severe mental health conditions often extended to more than two years, leading to prolonged benefit payments. On average, claimants received income protection benefits of about $5,400 per month, funded by premiums of around $115 per month. Self-employed policyholders made up roughly 60% of the portfolio examined, many of whom do not have access to employer-paid sick leave or extensive public income replacement.
Across the wider market, MoneyHub cited an estimated 5% to 8% decline rate for income protection claims, with non-disclosure of medical or personal information identified as the main driver of declined claims. The average age at purchase was 41, with many customers first taking out cover in their late 30s to early 40s as mortgage debt and dependants increased their exposure to income loss. “Income protection is arguably the most underrated insurance product in New Zealand. You are far more likely to be temporarily unable to work than you are to die during your working years. A back injury, a mental health crisis, or a cancer diagnosis can leave you without income for months – and that’s exactly when the bills keep coming,” Christopher Walsh, founder of MoneyHub, said. He said the data illustrated the gap between premium levels and potential benefits. “The average premium of $115 per month buys $5,400 per month in benefits if you need to claim. That’s a 47:1 ratio of potential benefit to cost. Few other insurance products offer that kind of leverage. And ACC only covers accidents – if you can’t work due to illness, ACC pays nothing,” he said.
MoneyHub’s separate examination of life insurance experience over the same 12‑month period found that cancer was responsible for 55% of all life insurance claim payments in the data set, making it the largest cause of death-related payouts. Drawing on claims data from the same large independent adviser and industry statistics, the analysis reported an average life insurance payout of about $350,000. However, MoneyHub’s modelling suggested that many households require cover of $1 million or more to manage mortgage liabilities, children’s education, and income replacement, particularly in regions such as Auckland where the median house price exceeds $1 million. Heart-related conditions accounted for 22% of life insurance claims, with the remaining share spread across other causes of death. Industrywide, 3% to 5% of life claims were estimated to be declined, primarily due to non‑disclosure of existing health conditions at application. Based on adviser feedback and claims usage patterns, MoneyHub estimated that roughly half of life insurance lump sums were applied to mortgage repayment, about 30% to children’s education, and the remaining 20% to income support.
For a policyholder earning $100,000 a year, a $350,000 payout equates to about 3.5 years of income replacement, which may leave a gap for families needing longer-term support. “The average payout of $350,000 sounds like a lot until you consider what it needs to cover. A $600,000 mortgage alone would consume most of it. Then there’s children’s education at $100,000 to $300,000 per child, plus income replacement. Most New Zealanders need more life insurance than they think, and the cost of adequate cover is lower than most people assume,” Walsh said. He added that the claims profile challenges perceptions about who is most at risk. “The question isn’t whether you can afford life insurance – it’s whether your family can afford for you not to have it. Cancer doesn’t discriminate by age. Working-age New Zealanders in their 30s, 40s, and 50s are diagnosed regularly,” he said.
The MoneyHub findings on income protection and life insurance sit against the backdrop of the Financial Services Council’s (FSC) State of the Sector Report, which outlines the contribution of financial and insurance services to New Zealand’s economy and household finances. According to the FSC, the financial services sector contributed $16.1 billion to gross domestic product in the year ended June 2025, making it the country’s seventh-largest industry by GDP contribution and placing it ahead of sectors such as agriculture and wholesale trade.
The report, which aggregates regulatory, industry, and consumer data, described how the sector supports long-term saving, investment, and risk transfer for individuals and families. As of the latest reporting period, there were 4.13 million life insurance covers in force, with $1.368 billion paid in claims in the year to September 2025. Over the same period, 1.35 million health insurance policies generated $2.545 billion in claims payments. The combination of rising mental health-related income protection claims, cancer‑driven life insurance payouts, and a growing sector footprint is informing industry discussion about product design, underwriting for emerging health risks, and the extent of underinsurance across New Zealand households.
