Early on, careers are usually about getting a foot on the ladder. Those early years often involve regular promotions and steady rises in income as you gain experience and take on more responsibility.

But as you move through the years and your salary rises, one area that frequently lags behind is personal insurance.  When your income rises, so too should your insurance. Failing to adjust your policies can leave a gap between what you earn and what you would actually receive if you couldn’t work due to illness or injury. 

Why income matters in personal insurance

Most personal insurance policies that replace income (such as income and mortgage protection and disability covers) calculate benefits based on your declared income at the time your application is submitted, following a premium review period, or when you proactively update it. If you don’t regularly review your cover and it is based on an older, lower salary, then the payout you receive in the event of a claim may not match the reality of your current financial commitments. This matters if you want to ensure you can comfortably cover your fixed costs, such as your mortgage, other debt, bills and ongoing lifestyle commitments. 

Income protection insurance in New Zealand is designed to replace up to 75 per cent of your pre-tax income if you are medically unable to work because of sickness or injury. This type of cover fills a significant gap left by ACC, which only provides compensation for accidental injury and not illness. For many Kiwis, illness accounts for the majority of long-term income loss, not accidents.  

What happens when you earn more

As your income increases, your financial obligations usually increase too. A pay rise might mean taking on a bigger mortgage, deciding to send your children to private school, or increasing your regular spending. If your insurance hasn’t kept pace, the replacement income you may receive under your policy may fall short.

For example, take Dave. Dave is a 35-year-old software engineer whose salary has risen from $90,000 to $160,000 over the past several years. Two years ago, Dave married Sarah and they now have a 14-month-old daughter. Dave has income protection, but he hasn’t updated it since getting married or having a child and his policy is still based on his $90,000 salary. If Dave were to fall ill and need to make a claim on his income protection policy, it will only replace up to $67,500 per year (75 percent of the $90,000 salary Dave was on at the time he applied for cover), which would leave a significant shortfall in Dave and Sarah’s household income and likely add pressure at an already stressful time.  

The impact on other covers

It is not only income and mortgage protection policies that are impacted by changes in your salary. You should also consider your income, lifestyle and financial obligations when taking out life insurance, trauma cover and total and permanent disability (TPD) insurance. These policies are typically designed to support your dependents or to fund your financial obligations if something unexpected happens. If your cover is based on an outdated income figure or doesn’t consider major lifestyle changes such as having children or taking on additional financial responsibilities, it may not provide enough cover to protect your family’s future or to settle any debt you have.

According to research by the New Zealand Financial Services Council, while many households recognise the value of insurance, a substantial proportion remain underinsured or wait too long to update their cover. Only 41 percent of Kiwis surveyed reported having life insurance and 39 percent health insurance, with the report highlighting that “individuals who have insurance may become underinsured due to not reviewing their insurance needs following a life-changing event such as having children or buying a new home.”  

When to review your insurance

A good rule of thumb is to review your cover every two to three years, or whenever there is a meaningful change in your financial situation. This might include: 

• Pay rises or promotions
• Changes in job responsibilities and/or moving into a leadership role
• Starting or expanding your family
• Taking on larger financial commitments such as a new home 

At Threefold, you won’t be charged a fee for our advice. Booking in a free insurance review will help ensure your personal insurance remains aligned with your financial commitments and lifestyle.

Action points to consider now

As we move into 2026 it is worthwhile to:

1. Check your current policies: Look at the insured income level and benefit definitions. 
2. Update your income estimates: Make sure they reflect your latest earnings. 
3. Consider whether an agreed value policy might be beneficial: These policies lock in benefit amounts based on your income at the time the policy is taken out, which can (in certain instances) offer greater certainty.  
4. Get professional advice: Our advisers are here to help. A personalised review will identify gaps and recommend changes to ensure your policies suit your goals and obligations.  

As your job and lifestyle evolves, so too should your insurance. To book a chat with your Threefold insurance adviser, contact them directly or fill in the form here.  

The content of this article should not be taken as financial advice, or a recommendation of any financial product. These insights are based on current economic commentary, market pricing for interest rates, and our personal opinion. Threefold is not liable or responsible for any information, omissions, or errors present.