Income Protection Insurance
Think about it.
What would happen if suddenly, due to an illness or injury, you were unable to work?
Or if you were made redundant?
Could you pay your bills?
Could you sustain your lifestyle?
We often take our income for granted, and we make lifelong plans on the assumption that our income will continue at the current level and even grow. We buy a house, spend up on our credit cards, and buy the latest appliance on hire purchase without a second thought for the possibility of losing that income.
But the harsh reality is that most people have only enough financial reserves (including paid leave and sick leave) to cover their mortgage or rent and other ongoing costs for three to six weeks if they are made redundant or can no longer work because of illness or disability.
Income Protection Insurance guarantees a monthly payment if you’re unable to work due to illness, injury or redundancy.
What is Income Protection Insurance
Income Protection Insurance, is an insurance policy that pays a monthly benefit (Indemnity Value up to 75% or an Agreed Value) to policyholders who are unable to work due to illness or accident, after an agreed waiting period of 2-, 4-, 8-, 13-, 26-, 52 or 104 weeks and the income protection insurance payout benefit period are two years, five years, to age 65 or age 70.
Income Protection Insurance Claims Statistics
When buying income protection insurance, you are buying the right to make a claim against the policy between you and the insurer.
So far so good.
The leading insurance companies publicise every year how much they have paid in claims to the customers.
And this is the proof.
Here some statistics from Fidelity Life.
Income Protection Insurance and ACC
Accident Compensation Corporation shortened ACC is as the name implies compensates for accident-related incidents.
ACC state on their website that
“ACC pays up to 80% of your income as weekly compensation if you’re unable to work because of an injury ACC is covering. This means you’ll still get paid while you recover.”
To me, there are two things that stand out.
First unable to work because of injury and second injury that ACC is covering.
While ACC is good and provides cover for specific injuries,
Physical injuries we cover
A physical injury is when there is actual damage to your body. This includes:
- sprains or strains – such as ankle, back, knee or shoulder sprains
- wounds – cut, broken or bruised skin
- dental injuries
- hearing loss
- loss of consciousness.
How does Income Protection work?
You receive a monthly payment in the event of an illness, disability or redundancy preventing your return to work. These payments kick in after an agreed waiting period.
The amount of monthly payment (depending on the product chosen) can range from covering 75% of your income up to an agreed amount.
The longer the waiting period before payments begin, the lower your premiums will be.
Look at what Income insurance can offer you:
- Monthly payments to cover loss of income
- Cover for both illness and redundancy
- Inflation-adjusted payments
- Short-term or long-term support
- Assistance and support with re-training
- Choice of payout periods from 2 years up to 70 years of age
- Stepped or level premiums
Our chosen insurance provider offers a range of income insurance products. Each type provides different benefits and is designed for different needs but the result in each case is peace of mind for you and your family.
“Having income protection has been a godsend. If we didn’t have it, we would have had to sell our house in order to have something to live on, and go rent somewhere. Everything would have been so different.”
I have a regular income—do I need income protection?
The most comprehensive Income Protection cover will provide monthly payments for an agreed period. You have four cover period options lasting two years, five years, up to 65 years of age or 70 years of age.
You can choose an Income Protection level that will pay either 75% of your lost income or an agreed amount. This latter option is great for small business owners or others with fluctuating income levels.
Income Protection offers the following additional benefits as standard:
- Inflation-adjusted payments
- Cover while overseas
- Payments for a family member or a nurse to take care of you at home for up to six months
- You’re covered too for up to six months if you need to give up work to look after a dependent family member full-time
- Bonus payments when you return to work
- Pregnancy waiver—your premiums are taken care of for you
- Recurring disability—if the problem recurs within 12 months of returning to work your monthly payments will be reinstated without any waiting period
Tailor Your Income Protection
You can also tailor your comprehensive Income Protection cover with a range of additional options such as:
- Specific injury support—monthly payments for specific conditions regardless of whether or not you can still work
- Income boost—an extra 33% on top of your monthly payments
- Bed confinement—get paid for each day you must spend in bed during the waiting period
- Cover for Hepatitis B or C or HIV if you work in the medical profession
And your children can get a free cover too–up to $10,000 for each child.
I’m self-employed—can I get Income Protection?
Workability insurance is a product designed for those who don’t need all the add-on extras but who still want to provide certainty around their finances in the event of illness or disability interrupting their normal work life.
The Workability policy fills the gaps where ACC won’t cover you, for example where ACC rejects your claim because your injury is the result of a degenerative process.
It’s perfect for:
- Self-employed people who have a reasonably stable and higher level of income
- Young families with lower incomes
- People who want a more affordable policy with shorter wait times
The benefits include a wide range of shorter wait periods from 30 days to 90 days, rehabilitation and returning to work support, and inflation adjustment.
Workability insurance provides a dependable level of income protection combined with lower premiums and shorter wait times.
Mortgage and Rent cover is also a very popular option for self-employed clients and features payments of up to $5,000 per month.
What if I only want to cover my mortgage or rent?
Mortgage and Rent Cover is ideal for those who only need to have peace of mind security around their mortgage or rent payments. In the event of an illness or disability preventing you from working, you will receive an agreed monthly benefit to cover those essential rental or mortgage payments.
You will receive the agreed value of your mortgage from 40% of your income up to 110% of your repayments and this applies even if you have paid off your mortgage during the claim period.
The monthly payments are inflation-adjusted too so you won’t be left out of pocket by market changes.
There is also an optional add-on of redundancy cover. Mortgage and Rent cover is ideal for either employed salary earners or self-employed clients.
Is there a stand-down period?
Yes, all income protection type insurance policies have a stand-down or wait period before payments kick in. The wait times range from 14 days to 730 days.
It’s up to you to consider all the factors and choose how long you want your waiting period to be – most people choose between 30-90 days. Bear in mind that the longer the waiting period before payments start, the lower your premiums will be.
These wait time periods have been designed to make income protection insurance affordable for everyone.
Is the Income Protection from a reputable provider?
The provider of income protection insurance is one of the most highly regarded insurance companies in New Zealand and Australia namely Asteron Life. An A+ Standard & Poor’s financial rating ensures the money is there when you need it.