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What is Income Protection

Income Protection protects your income by providing you with a monthly benefit if you are unable to continue working. For example, if you were unable to work due to a serious accident or illness, either temporarily or permanently, income protection insurance could provide you with up to 75% of your pre-disability income to live on until you are able to return to work. Or if you were unable to return to work for the long term, an income protection benefit could continue to provide you with a replacement income for 2 or 5 years, or even to age 70.

Your Biggest Asset

If you are like most people, your income is your biggest asset and losing it could turn your life upside down and threaten your financial wellbeing. If you have major financial commitments such as a mortgage or a family, it is important to think about what might happen should you be unable to work for an extended amount of time – how long would you emergency savings last and what would happen after they ran out? Statistics show that 47% of working Kiwis aged between 18 and 64 could not survive longer than one month after using their sick and annual leave.


It is also prudent to remember that Government benefits are unlikely to cover your living and lifestyle expenses and that ACC only provides income cover if you are unable to work due to an accident. If you were faced with having to stop working due to an illness or degenerative condition, ACC would be of no use in this situation – could you survive with little to no access to Government assistance? If you do not have access to extensive savings it may be time to look at your income protection options and ensure your financial commitments are safeguarded. 


Across insurance companies there are various names for income protection insurance benefits, some are referred to as mortgage and income protection, indemnity or agreed value income cover and all carry different maximums in cover levels. Essentially, all provide a replacement income in the event that something goes wrong but finding which product is best suited to you depends on factors such as whether to not you have a mortgage, if you are an employee or self-employed and even what bells and whistles you may prefer. However, the biggest factors that affect your income protection premiums are your occupation, the amount of time you can wait before your benefit kicks in (generally four, eight or thirteen weeks) and the amount of time you would like your benefit paid for if you are unable to work long term (usually two or five years or to age 65).

No matter what type of income protection benefit you select, it is important to seek professional advice as not all policies are created equal and you want to ensure that you understand what you are and are not covered for. 

This means you’ll still be able to meet your financial commitments and make choices that are important to you.

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