What is your greatest asset? Is it your savings, your car, or your house?
Actually, your greatest asset is your ability to earn income. We overview Income Protection Insurance – the risks and benefits regarding your family security.
If you were to suffer from a serious illness, or you became permanently disabled and were unable to work, how long could you survive financially? How would you pay the expenses of mortgage / rent, buy food or run the car?
Few of us like to think about such possibilities, but it’s important to do so in order to protect your financial future.
Income protection insurance is designed to protect you if you become ill or disabled and you cannot work. There are some key factors to consider:
- How reliant are you on your work income? Do you have other sources of income? Are you supporting other family members? Does this income pay the mortgage? Would the loss of your income cause you serious financial difficulties?
- How long could you survive without income? Do you have savings built up? Your insurance will usually start paying out after 3 months of you stopping work, with the minimum period being a month. The shorter the waiting period you select, the higher will be the premiums.
- How long do you want the cover to apply for? You could take coverage for a short period of two years, or up until you are 65 – the choice is yours, but remember that if you become permanently disabled you will need income to survive the rest of your life.
- How much income should you protect? Although most of us would like to protect 100% of our income, income protection policies generally only cover 55% or 75% of your income. The higher the amount protected, the more you will pay in premiums.
Income protection insurance may be taken by employees who can elect to have up to 75% of their income covered. People who are self-employed and/or have highly variable income can set an Agreed Value payout – up to a maximum of 55% of their income.
Remember – in NZ ACC only covers accidents not illnesses, and will only provide you with a very limited income. To provide financial security for yourself and your loved ones consider income protection insurance. To quickly obtain a range of competitive quotes, simply search www.google.co.nz for “income protection insurance quotes”.