3 freaky reasons against Income Protection Insurance in New Zealand
Income Protection Insurance pays a reduced amount of your pre-disability income in the event you are sick and if in the result of the sickness you cannot work.
There are 3 freaky reasons against Income Protection Insurance in New Zealand
Would you want to know what many New Zealanders do not even think about? Let’s talk about what you would be able to get from your income protection insurance.
The amount you would be in title to receive is calculated by using one out two following formulas:
- Indemnity value– pays you 75% of your pre-disability income. The amount is confirmed once the claim is accepted by the insurer.
- Agreed value – pays you 55% of your pre-disability income. The amount of the benefit is confirmed on the day of application.
For the illustration I am going to use $10,000 pre- disability income.
- Indemnity value- $7,500
- Agreed value – $5,500
The reason for reduced income approach is based on that any insurance company recognises your need to get higher income or at least your desire to get to your normal (used to) level of income and therefore you are going to want get back to normal as soon as possible. Think of as a financial incentive provided by your insurer J
On the top of that, keep in mind that majority of Income Protection Insurance policies in place in New Zealand do have waiting periods which can be: 2, 4, 8,13, 26, 52 or even 104 weeks. The longer waiting period is, less costly income protection becomes. For you it means, that if due to very unfortunate reason you were diagnosed with cancer you are going to be without any money during “waiting period” your Income Protection Insurance has. Think of your specified “waiting period” as a double edged sword. On one hand it helps you to reduce the premiums on the other it is going to leave you without any income while you are on claim. It is always a good idea to take into consideration the period you can actually survive without income first before you are going to finally agree on the waiting period.
The third reason against Income Protection Insurance in New Zealand
If you had an accident your Income Protection Insurance pays you nothing. Why? If you are asking “why” most likely you need to familiarise yourself with ACC procedures. In New Zealand ACC pays for all accident related situations – well – most of them, some ACC do not cover. If you are going to rely on ACC keep in mind there are many Kiwis who are not happy with ACC. (Very unhappy).
Let me explain why your income protection insurance pays you nothing: ACC pays for accidents. On the top of that if you are for instance on “Indemnity value” income protection insurance it pays you 75% or as per my example above $7,500 plus you need to take waiting period ,to compare to 80% ACC entitlement and ACC pays after one week of waiting period.
Now let me ask you something – what do hear a lot more often people having accidents or having diagnosed with something awful? Exactly – people do get sick a lot more often.
If ACC comes back saying “Sorry- do to your generative disease you are not covered” what would you do?
Same example as above if you were diagnosed with “Cancer” ACC pays you nothing.
Conclusion, you like it or not but if you live in New Zealand and want to fully financially secure you are better off by having best of the both worlds – personal Income protection insurance and by default ACC cover. By having both options open you know that no matter what waits for you in the future you are going to be protected with your income benefit being paid to you.
If you have questions about your Income Protection Insurance or thinking about one for yourself please let me know your full date of birth, your occupation and your current level of income. In return you are going to receive a few comparable quotes for you to consider Income Protection Insurance.