Insurance Article

Which Income Protection Insurance Is Best for You? 

Why do you need to insure your income?

Accidents can happen, you may get ill. More than 1 in 10 people have taken six months or more off work due to illness or suffering a serious injury.

Income Protection Insurance 

Most of us think we are pretty well covered if it does happen.

Many people believe that ACC will cover them if they have a prolonged illness or accident, but this not always the case. ACC only covers accidents; fact is that 6 out of 8 people in hospital are there because of illness not through accidents, and these people get no help from ACC. 

Take your current income and multiply it by the number of years until you retire - that's your greatest asset, your unearned income.

You insure your house (your 2nd largest asset) but the risk of your house burning down is 1/16000 but the risk of you being off work through illness at age 40 for more than 90 days for both male and females is 40%.

That's why Income Protection Insurance can be a really useful back-up plan. If you were to suffer from a serious illness or injury and you were unable to continue working, Income Protection Insurance helps replace your income lost by not being able to work for a long period. The cover assists with the bills - mortgage, food and fuel, all those necessary expenses your family needs to continue life as usual.

Income Protection Insurance is available in two main types of policies.

Agreed Value - A fixed level of cover is agreed at the time the Income Protection insurance is set up - and this is the amount paid by the insurance company, regardless of your earnings at the time of the claim. The maximum amount you can insure is usually 55% of your gross income. The payment will not be taxed and the premiums are not tax deductible in this case.

Indemnity - The benefit is calculated as a percentage of your income at the time you make a claim. An indemnity policy normally pays 75% of the best of the previous three years income, but you must prove that income at claim time. The payment under this option is taxable, and the premiums are deductible.

Choosing the correct Income Protection Insurance can be confusing, with all the options available, waiting periods and "Add-ons". The biggest consideration is your employment status, normally jobs are classified by their occupational classes, which make a difference to the cost of premiums you may pay based on the "risk" of your job. Also the waiting period that you select will have an effect on your premium. Gender is also a factor. Women often pay more than men, as studies show that they make more claims. 

So, this is why we are here. To help you make decisions in choosing the right Income Protection Insurance policy to suit your current situation. We're here to help, just pick up the phone or email this office for more information on how Income Protection Insurance can protect your biggest asset.