Income Protection

Protect Your Income & Your Lifestyle

Income Protection Insurance pays you a specified amount typically 55%-75% of your regular income if you become sick, injured, or disabled and as a result are unable to attend work. Income Protection protects your lifestyle and finances even though you are not in a position to work and earn regular income.

Income Protection policies protect your largest asset (your ability to earn an income) by providing a replacement income should you suffer an injury or illness that results in a total or partial disability which leaves you to be unable to earn your normal income.

Most New Zealanders are reliant on their income and this is why most insurance advisers will say this is the most important insurance policy that you will ever have. It is therefore critical that you get the best policy and there is a lot of differences within the various policies that make having good advice crucial.

If you are self-employed you need to ensure that you have the right policy as many policies will not provide adequate protection for you at claim time.

Why You Should Have Income Protection Insurance?

Income Protection insurance provides you the following advantages thus easing the financial stress on your family:

Pay your expenses – Sickness, Injury, or Disability may affect your earning ability. Income protection insurance can help you pay off the mortgage instalments, rent and other living expenses in order to reduce the financial burden on your family.

Regular Payouts for a defined period – Your insurance company will pay you 55% – 75% of your regular income for a specified period which typically ranges from 2 years up until you turn 65. Your payouts can start in as little as 4 weeks from the time you lodge a claim.

Protect your business – If you are self employed you can take cover for up to 75% of your regular business income thus utilising the payouts to cover your business expenses or hire someone to run your business while you’re focused on recovering.

How much Income Protection Insurance is sufficient?

To ensure you have sufficient insurance to cover yourself and your family in the event of a disability, sickness or injury, you must take income protection equal to 75% of your monthly regular income or salary.

The key choices within most policies include;

Amount of Cover – most policies now allow you to cover up to 75% of your income, but you need to determine how much of your income you need to insure.

Waiting Periods – this is like an excess and determines how long you need to be unable to work before you are eligible for a claim. The options are generally, 2-weeks, 4-weeks, 13-weeks, 26-week and 52-weeks with the cost of the cover increasing with the shorter wait periods.

Benefit Periods – this is how long you would be entitled to continue to receive a claim. The most common benefit periods are to age 65 or 70 which is the deemed retirement age; however if you want to reduce the cost of you insurance you can elect a 2-year or 5-year benefit period.

Booster Benefits – some policies allow you to boost your claim by 33% for the initial 3-months of a claim. This helps you adjust to a lower level of income and is especially important for long-term claims.

Dependent Relative Benefit – this will provide a monthly benefit should you need to give up work to provide a full-time care for a relative who can no longer take care of themselves.

Retirement Benefit Option – this will ensure that your KiwiSaver contributions continue to be made while you are on a claim and therefore unable to continue to fund your retirement savings.

There are a number of other benefits within the various policies that may determine which policy you select.