Income Protection Insurance provides a regular income in the event that illness or injury leaves you unable to work. It is an important way of making sure that while you may lose the ability to work for a living due to illness or injury, you won’t lose your income. This is especially important when you have increased financial responsibilities such as mortgages, dependents or a business.
Statistics show, that a huge number of people are committed to maintaining car and house insurance payments, or insurance on other tangible assets, however, some of us don’t insure our ability to continue to pay for these assets in the event of illness or injury. Your income provides you with the ability to pay for the things that are important to you. Are you protecting your greatest asset – your ability to earn?
Income Protection, unlike ACC covers non-accidental reasons for being off work. One of these reasons as an example is stress, which is the number one reason for people needing time off work in New Zealand.
How much does it cover?
Income Protection Insurance does not cover 100% of your wages, however there are two options:
- You get paid 55% of your income (agreed value): the premiums you pay are not tax deductible and you won’t have to pay tax on the income you receive at claim time.
- You get paid 75% of your income (indemnity): the premiums you pay are tax deductable and you will need to pay tax on the income at claim time.
The difference between the two options is the amount of certainty at claim time. Contact us to discuss the options with an advisor.
Who needs Income Protection Insurance?
This is dependent on perspective. How long could you maintain your lifestyle without an income. It is worth looking into Income Protection if your quality of life depends on your income. Many people do not realise that over two thirds of disabilities are caused by illness and consequently no ACC benefit is payable. (AIA source Davis Financial and Actuarial 2005).
Questions about ACC or need Income Protection?
Our expert advisers give free of charge advice on Income Protection and how to adjust your ACC to fit your business, plus inform you of what is and is not covered by ACC.