Awesome Mortgages Insurance

Income Protection / Mortgage Repayment Cover – in case you are too sick to work.

What would you do if you could no longer earn an income? Learn about the benefits of Income Cover and download a brochure detailing income protection insurance in more depth. You’ll also find answers to commonly asked questions.

benefits of income protection cover

the risk: You are too ill to work. Along with your health, your ability to earn is probably the biggest asset you have. In the event of an accident ACC might pay, however in the event of sickness there is no ACC available.

critical questions: What would you do if a serious illness or accident stopped you from working for the next couple of years or longer? How long would you survive if you were unable to work, and who else in your family would this affect?

peace of mind: Income protection provides you with a monthly benefit that replaces a percentage of your income, so you can keep on top of any debts and meet your living costs. A mortgage repayment policy is an alternative which simply covers your ongoing mortgage repayments.

claims statistics: Common causes of claims include: Mental health issues, Neurological issues and Cancer (Sovereign, 2010)

Awesome tips! Income protection should be a critical component of your risk plan, especially when there a 100% reliance on your income to pay bills, mortgage, etc.

With an agreed value policy the value of the claim payment is agreed based on your income at the time the application for cover is made. This is the amount regardless of your actual income at the time of claim. The claim payment is based on 55% of your income and there is no tax to pay. Because of the certainty provided, agreed value is our most recommended type of income protection.

The choice of wait periods (the time between making a claim and payment) can be 2, 4, 18, 13, 26, 52 or 104 weeks. If you would be able to survive for a couple of weeks or more without income the premiums significantly reduce for longer wait periods. For example, if you could tread water for 4 weeks premiums reduce by more than 100%.

Premiums further reduce for a benefit period (the length of time insurance company will make your claims payments for) of two or five years. But given how important your income is to your plans and lifestyle I strongly recommend a benefit period to age 70.

Helen’s story:  “life can change in an instant.”

Age: mid 30’s.
Insurance: income
Claim: chronic fatigue syndrome

Following the death of her husband, Helen, now a sole parent, had already learnt that it was important to have insurance to provide for her children if she died, but she had never been sick or suffered an injury.

“My instant reaction was ‘no way, I’m not wasting that much money,” she said when she was advised protecting her ability to earn an income was essential now that she was the sole breadwinner.

A year after taking out income protection insurance, Helen was diagnosed with Chronic Fatigue Syndrome. When her claim was accepted she was hugely relieved to be able to focus on her recovery without the added stress of worrying about her finances.

“If I hadn’t had the security of my regular insurance payments I would have lost my house, and my children would have suffered a drastic change in their life style.”

download an income cover brochure

To help you make an informed decision please click the following link to download further information about income protection cover from Partner’s Life.

The brochures insurers provide are reasonably generic and I have found Partner’s Life to offer the best plain English explanations, so I tend to prefer directing you to these as opposed to bombarding you with everyone’s.

Once we have a clearer idea re your needs we can choose the insurance provider which best suits your requirements.

frequently asked questions

what about redundancy cover?

 A few insurers have added redundancy provisions to income protection packages.  I however question the value. Payments are for a maximum of 6 months or until you find another job, and any redundancy payment you may receive can affect your ability to claim.  So most of the plans are not particularly good value for money.

Ballpark premiums for income protection for you with a redundancy provision included are $177 (versus $100 without a redundancy provision).  If you can self-insure it will save you some money.  And the additional premium for having a redundancy provision may be better spent on having other cover – e.g. trauma insurance.

Personally I think that redundancy is something that people should guard against by having their own emergency fund.

what about trauma cover – won’t that protect my income?

Both trauma insurance and income protection can replace lost income.  They however work in different ways.

Income protection is designed to replace cash-flow whereas trauma insurance is a lump sum payment which can be used for a number or purposes including replacing lost earnings.

Trauma insurance protects you against the risk that you suffer a major health condition, such as cancer, heart disease or a stroke and is paid upon diagnosis.  It is not necessary that you be unable to work and there is no wait period.  It provides extra money to pay expenses regardless of whether or not you are able to work.

Income protection protects you if you are too sick to work.  In the event of an accident ACC might pay, however in the event of sickness there is no ACC available.  Income protection only kicks in when you are unable to work.  The amount you can claim is a percentage of your earnings, so less than you are used to taking home, and is linked directly to what you earn.

 In a perfect world, and if you can afford it you would have both covers.

This is because medical conditions which can temporarily prevent you from earning your normal income can lead to medical conditions which are by nature serious and potentially life threatening.

For example a short term disability (e.g. work related stress or an undiagnosed condition) could result in a claim under income protection but would not meet the definition of a claim under trauma insurance.

If you then for example, went on to suffer a stroke or a heart attack, or were diagnosed with a trauma covered condition (e.g. cancer) trauma cover would then provide a lump sum benefit.

The funds from income protection would help with immediate cashflow needs to replace earnings. The payment from trauma insurance could then for example be used to purchase specialised equipment or to pay for home modifications, or non PHARMAC funded medications. So in short, it’s possible to claim on both for the same condition.

With advances in medical science, post suffering a heart attack many people are now deemed fit to return to work within a little as a week.  A trauma payment would provide a lump sum payment to (for example choose to delay) returning to work, work less hours or help reduce debt.

Income protection would be unlikely to offer any benefit in this instance. Income protection would however pay a benefit during treatment and recovery of a multitude of conditions which would not meet the definition of a trauma claim.

So in answer to your question regarding whether trauma insurance would be better than income protection for you, the nature of the illness or disability will ultimately determine the best option.

Which is why in a perfect world you would have both covers.

protecting your personal risk

People often think about covering their income but forget about all the other risks.There’s a wide range of options to give you peace of mind – and they needn’t be expensive. With the right advice you can choose the best option for you.

Two easy ways to get started are either to let us guide you from the start or to work things out for yourself first:

  1. let us guide you from the start

To find out how much insurance you really need, let us guide you. Click here and tell us what’s most important to you – your biggest concerns and highest priorities – and let us know what covers you may already have.

We’ll get back to you with a confidential, customised, obligation-free assessment and a personalised recommendation.

Once you know your options you can then make your final decisions.

  1. Learn more about different options and decide what you may need for yourself

To understand what types of cover are available go to my insurance options or what is my risk? to get a feel for the type of cover you may need. It’s a great place to start. You may also like to read our blog – how much cover do I need? – which includes real life stories.

 

Personal risk calculator. The Financial Services Council ‘offer a helpful and impartial personal risk calculator. It’s quick and easy to use – in as little as 6 minutes you can get an indication of the insurance cover recommended for your situation.

We can then discuss and fine tune the options, and give you indicative costings.

Whatever way you decide to go, I’m always here to help. I will be in touch shortly to find out your preferences.