Income Protection
Your greatest asset is your ability to earn an income.
If you had an accident or suffered a major illness and were unable to work, where would the income for you and our family come from?
Would your partner be able to compensate for your lost income by working more, or entering the work force?
Four out of ten males and six out of ten females are likely to be off work for 30-90 days due to an illness or accident before they turn 65.
ACC does not pay out for illness such as heart attack or cancer. It only pays for accidental injuries.
The most common reasons for income protection claims are related to Mental Health (26%), Cancer (21%), Orthopaedic (19%), Neurology (9%) and Heart (7%). (Income protection claims with Tower).
What happens if you don’t have income protection?
- Use sick leave – but would you have enough to cover a medium term illness lasting more than a month?
- Use savings – do you have enough, and how long would they last?
- Rely on ACC – but this only covers accidents, not illnesses.
- Rely on your partner’s income – is it enough, and can they work and look after you?
- Borrow money – who would lend to you in these circumstances?
- Sell assets – are you willing to lose your home?
- Rely on the sickness benefit – can you survive on this level of income?
How will income protection help you?
Income protection provides cashflow if you can’t work. If you were disabled and no longer earning an income, how would you manage financially?
In some circumstances you may receive financial assistance from the Government. The bad news is that it’s unlikely to be enough to maintain your current lifestyle, let alone allow you to plan for your future – pay off the mortgage, your children’s education, retirement savings, holidays, etc.
The insurance industry provides several options for income protection and business continuity if you are unable to work. However, it is important that you have the right benefit for your circumstances and structure:
Mortgage Protection Cover
Anyone that has a mortgage can now cover up to 45% of your income under this type of cover it allows you to claim the full monthly benefit even if you are receiving support from ACC, or sickness benefit so if you have a long term injury or sickness this type of cover is ideal to have in combination with a top up of income protection.
Indemnity / Loss of Earnings
Designed for salary earners with stable incomes. The annual benefit is based on the life assureds’ total income package, including salary or wages and fringe benefits received from the company, and other rewards after business expenses and before tax.
The claim benefit is usually based on 75% of the gross pre-disability income. Under current tax legislation the premium for indemnity contracts can be tax deductible in some circumstances. Most of the payments you receive are assessable as income.
Loss of earnings plans allow you to claim up to 75% of any loss incurred, so in case of an ACC claim where you can incur a 20% loss (80% of income claimed) this can allow you to claim 75% of any loss allowing an additional 15% of your income to be claimed. Under a standard indemnity of agreed value plan the contracts wont allow you to claim, this is particularly helpful for high income earners or persons who dont have a mortgage.
Agreed Value
Primarily designed for business owners, but also suitable for those who are employed, particularly applicable for fluctuating incomes. This option provides an amount that is “agreed” upon from the outset. This means that you don’t have to prove your income at claim time, and your benefit will remain the same, regardless of any change in your income. (but will not exceed your covered amount)
Usually pays out up to 62.5% of your pre-disability income, less other benefits such as ACC, Sickness Benefits and benefits from other income protection. Under current tax legislation the premiums paid on Agreed Value is not tax deductible. Most of the payments you receive are not assessable.
Mark's Story
Mark is a passionate family man and motorcycle enthusiast. But a motor vehicle accident nearly cost him everything.
Asteron Life’s Income Protection insurance helped him get back to doing the things he loves.
Asteron Life’s Income Protection insurance helped him get back to doing the things he loves.
Mortgage Repayment Cover
Mortgage repayment provides a direct payment to your mortgage provider if you are unable to work due to sickness or accident. If you have a home loan, mortgage protection ensures that your property stays in your possession, by taking care of your regular mortgage repayments, or/and clearing the home loan completely with a lump sum on death, total disablement or in the event of suffering a major illness. Some providers include a redundancy option with their mortgage protection cover.
We'd love the opportunity to learn about your unique circumstances so that we can think carefully about the appropriate solutions for you. Drop us a line using the form below and we'll get in touch with you to provide a Free Income Protection quote.
