All you need to know about: Income Protection Insurance

Wed Feb. 17th 2016

Income protection provides cover to one of your greatest assets…. Your Income!

Income protection provides cover to one of your greatest assets…. Your Income!

It is a type of insurance that provides individuals with continuity of income should they suffer a long-term illness, disability or other loss of income not covered by ACC.

Misconception - I thought if I was off work I was covered by ACC?
ACC automatically covers 80 percent of your income in the event of an accident that prevents you from working. It does not provide alternative income for you or your family in the event of a sickness, trauma or certain kinds of disability such as a stroke.

Is there more than one kind of income protection policy?
Yes. One type of income protection insurance pays a percentage of your income after a qualifying period. You can also obtain income protection insurance for situations when an individual suffers trauma, disability or total permanent disability based on regular payments of a previously agreed amount. The right policy for you depends on your age and circumstances.

What exactly is the problem with not having income protection insurance?
The Government's universal sickness benefit entitlement is around $343 a week. However entitlement to this benefit is affected by your partner's earnings and is only available if your other household income is below a certain figure. Many families without income protection insurance would find themselves experiencing serious financial hardship very quickly if the main household income earner were off work for as little as a month.

Why don't people buy income protection insurance?
Many people resist contemplating an eventuality such as the inability to work for three to six months or more. Unfortunately such a situation is statistically much more likely than a sudden death. While most New Zealanders prepare for the latter by taking out life insurance, most fail to insure themselves and their families against a much more common financial hardship – sickness or disability.

What is the industry doing about the cost and accessibility of income protection insurance?
The industry is developing new types of policies and better information to encourage a greater number of New Zealanders to acquire income protection insurance.
The large insurers including, but not limited to, AIA, AMP,Asteron, OnePath, Fidelity Life, Partners Life, and Sovereign are continually reviewing their benefits, terms and pricing to ensure that the best products are on offer to individuals

How can middle income families afford income protection insurance?
The best way for middle income families to afford income protection insurance is for them to regularly review their total insurance cover package as their circumstances change. For example, as you get older, pay off your mortgage and your children are no longer dependent, your life insurance needs can reduce, freeing up more resources for income protection insurance.

Who should I approach to look at my personal situation?
Ask us, as your Trusted Financial Advisers.

We will be able to discuss the insurance products that best meet your current needs and provide complete information to allow you to form the most accurate picture possible of your circumstances.

Statistics show that, during their working lives, two out of five people will be disabled for six months or more by sickness or an accident.³ What if you were one of them?

Some points to consider:

Ø 1 in 6 males over the age of 30 will die before they reach 65¹

Ø 1 in 9 females over the age of 30 will die before they reach 65¹

Ø 40% of disabilities are due to disease or illness, 34% are due to accident or injury²

Ø There is a 37% probability of a female becoming disabled for 6 months or more before age 65³

Ø There is a 32% probability of a male becoming disabled for 6 months or more before age 65³

Ø 24% of cancer-related deaths in 1998 were between the ages of 45 to 64²

1. Statistics New Zealand (2000), NZ Life Tables 2000 -2002

2. NZ Health Information Service (2001), Mortality and demographic data 1998

3. GeneralCologne Life Re Australia (2000), State of play of disability insurance in New Zealand 1995-1999

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