Let’s address the elephant in the room – in my opinion, Income Protection Insurance is often the most badly sold product in our profession.
The reason I say this is that in the event of an accident, any income protection policy will offset what you receive from ACC. Bear in mind that ACC in New Zealand covers you for up to 80% of your earnings whereas an income protection policy can only cover you to a maximum 75% of earnings. Therefore, if you are unable to work as a result of an accident, you are likely not to receive any benefit from your income protection plan.
So, is income protection still worth having? Most definitely, but you need to do your homework to ensure it fits in with your situation. For example:-
i) Income Protection will cover your lost earnings if you are unable to work due to illness
ii) There is a maximum earnings cap for ACC of $124,053 for employees and $122,063 for the selfemployed. Individuals with large income can use income protection to provide additional cover to ACC
iii) Income Protection is privately paid insurance for accident or illness. Selfemployed and shareholder employees can access ACC Cover Plus Extra and reduce their ACC cover (and their premiums) and top up their ACC with income protection
iv) Remember that ACC will only pay if the claim is purely down to an injury. If there is a hint of a pre-existing or degenerative condition then there may be no ACC claim
If you consider conditions such as depression, fibromyalgia, back pain, cancer, heart attack, stroke, major elective surgery, none of these would likely be covered by ACC and not having any income during this period of incapacity will likely leave you in severe financial trouble.
For most of us, our single biggest asset is our ability to earn an income, so perhaps its now time to look at what income protection insurance can do for you. Seek advice on getting the correct type of cover that suits your situation (there is a choice of Loss of Earnings, Agreed Value or Indemnity contracts) some of which are tax deductible.
The trick to this is balancing it all out and getting the right advice. As Warren buffet once said “What the wise do in the beginning, fools do in the end”.
I’m here to help you out and ensure that you can still look after yourself and your family in the event of an illness or accident preventing you from returning to work. Get in touch, have a chat and we’ll sort out the best income protection insurance to suit your situation.