Income Protection Insurance Vs. ACC
Kiwis are lucky to have ACC in place. It’s a scheme that provides a basic level of assurance when it comes to our livelihoods and its structure means New Zealand avoids much of the personal injury type litigation associated with places such as the United States.
ACC however is limited as to what it covers, and gaps certainly exist. This week we look at why Income Protection Insurance is so important and the differences between it and ACC.
What is Income Protection Insurance?
In the event you are sick or injured and unable to work (usually beyond a four-week stand-down period), Income Protection provides you a consistent payment up to a maximum of 75% your regular pay.
This means you don’t have to raid the savings account, miss the critical bills like mortgage/rent or utilities and keeps pressure off your family and friends to cover your costs while you’re unable to work.
Why not just use ACC/Welfare?
ACC only provides cover where an accident stops you from working, it does not assist in the event of sickness. Another key aspect of ACC is that there is usually no cover available if a condition is pre-existing or degenerative.
Income Protection provides far more extensive protections than ACC alone.
The government does provide some support for those unable to work through the Supported Living Payment however this limited and means tested. Many families will simply be too wealthy for this benefit yet left in a situation where they are unable to afford to pay the mortgage, rent or power bills if a breadwinner is unable to work.
Finally, it’s important to be aware the chances of a prolonged absence off work due to sickness are four times greater than that from an injury.
Is it expensive?
Buying an Income Protection Insurance Policy is much like buying a car. Avoiding the lemons is critical but most of us can’t afford a Tesla either. Our key tip is to work with a qualified Financial Adviser. They will provide you a Statement of Advice (SOA) when quoting Income Protection cover. The SOA should support their recommendation through independent research and recommend an appropriate solution within your means.
Your cover can be tailored by the percentage of income covered, stand-down period or conditions insured.
If you want to discuss Income Protection Cover or would like to review your existing cover please feel free to email info@foxplan.nz and one of our advisers will be more than happy to assist.