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Income Protection
ACC may provide some ongoing income if you have an Accident, but what if you become seriously ill, not related to an accident? ACC will pay you nothing. What if you are off work for months, or even years. How do you pay your bills? A long term sickness benefit might not pay you much.
What does it do?
Income Protection generally provides a known replacement income should you be off work for either Accident or Illness for an extended period of time. Monthly payments can be up to 75% of your normal income (up to 100% for a short period with Booster Benefit). You can receive payments from 2 years or up to Age 70 depending on your cover, or your return back to work. Most premiums are Tax Deductible.
Why have it?
In New Zealand we do tend to have a "She'll be right" attitude, but if something goes badly wrong, your savings might not last for long, yet the bills just keep coming in. You might be off work for much longer than you anticipate - months or even years. With long term Income Protection in place you have the peace of mind in knowing that you can continue in life, much as it was before you became unwell.
Options
- Booster Benefit can provide up to 100% of normal income
- The wait period before claiming is from 2 weeks to 2 years. The shorter the wait period, the more the premium.
- Most people have a wait period of 4weeks, 8weeks, or 13 weeks.
- The claim period per claim is from 2 years, up to Age 70. The longer the claim period, the more the premium
- Most people have a claim period of 5 years or to Age 65 (or 70).
- Mental Health limit of 2 years per claim - can reduce premiums.
- Inflation adjusted claims - very helpful for long term claims.
Premiums
Income Protection premiums are based on: Age, Male/Female, Health history, Smoker/Non-smoker, Job description, Pastimes, Wait period before claiming, and Maximum claim period. Most people obtain cover for the maximum 75% of income (long term), however for people on high incomes, some take the option of reduced cover to reduce the premium. As your work changes, salary changes, and your savings change, it is important to regularly review your income protection to make sure you are well covered, but also in line with affordability. Premiums for most policies are Tax Deductible for most people.