What would happen if you suffered an injury tomorrow and couldn’t work any more?
Would you still be able to maintain your lifestyle? That means, could you still make your mortgage payments, pay the bills and put food on the table for your family?
If you rely on your income (which most of us do), then it is something worth protecting.
That is what income protection insurance is all about, to stop you from panicking if something does happen to your main source of income.
But what about ACC I hear you saying?
ACC definitely has a time and a place, but it is not a guaranteed alternative to your regular income. So let’s look at what income protection insurance actually is, what can happen if you don’t have the cover, and why you shouldn’t rely solely on ACC as an alternative to your main income source.
What Is Income Protection Insurance?
Income protection cover protects your largest asset – your ability to earn. It is a monthly benefit designed to replace your income if you suffer an injury or illness that results in total or partial disability leaving you unable to earn your usual income.
Most people rely on a regular income, so this is the protection you need to stop from losing your house and being able to still support your family. This kind of private insurance provides certainty that you will be able to cover your costs if you were unable to work.
Income protection comes in many forms, so it is best to speak with an advisor about the right kind of cover for your individual situation. People earn income in different ways, therefore you will find a range of different Income Protection Insurance policies designed to suit these different situations.
There are three main types:
1: Indemnity – This is the most common type of cover as it is the easiest to apply for. But that does not necessarily mean it is the best. When you take the policy out, you state your income and the amount of cover you require. Then if you need to lodge a claim, it is up to you to prove that you were earning at that level.
2: Agreed Value – This is exactly as it sounds, you agree with the insurance company a set amount that they will cover you for. It can be a good option for people that are self employed so you know exactly what you will receive.
3: Loss Of Earnings – This is probably the cover with the most certainty at claim time as there is a choice of options for how your ‘loss of earnings’ is calculated. It can take into account other entitlements owed to you such as ACC.
It is best to have a chat with us here at Insurance Link so that we can assess your current situation and recommend the cover that is going to suit you the best.
What Can Happen If You Don’t Have The Cover
Most people need a regular income, and if it isn’t there any more, it would not take long before financial troubles hit.
The best way to work out if you need income protection cover is to ask yourself these questions…
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How long are you able to survive without an income?
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How much of your income could you survive on?
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Would you be able to stay in your house if your income ceases tomorrow?
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Would you be able to stay in your house if your Income Protection Cover benefit stops in ‘say’ 2-years?
You don’t want to be in a position where you are relying on ACC or charity for assistance, as those things are not a guaranteed option.
Pitfalls Of Relying On ACC
ACC stands for Accident Compensation Corporation. The key word here is ‘Accident’.
In order to claim any kind of replacement income through ACC, your injury must be caused by an accident. They do not cover hereditary illness, contagious diseases, issues caused by ageing, or injuries that have occurred over time unless it was a work related activity that caused it.
So that could leave you high and dry on the income front if what is stopping you from working was not caused by an accident.
The other thing to keep in mind with ACC is that they will only pay 80% of your income, so it could leave you short.
Private insurance companies are invested in their clients, our very own Sales Manager, Graham Clark experienced this when he broke his Achilles not so long ago. He mentioned the level of help he had from his insurer was incredible. There was plenty of support and they were happy to answer any of his queries.
But when he was dealing with ACC, they were clearly following a tick box process to work through his claim. If the criteria for one of those boxes was not met, then there would have been an issue with his ACC claim and he may of been without the payments from them.
That is the problem with relying on ACC, you simply cannot guarantee the outcome if you are unable to work. Whereas with a private insurer, if you have taken the time to establish the correct cover initially, then the claim process will be smooth and hassle-free.
So if you want to protect your income and ensure you don’t face any problems if you need to make a claim, then income protection cover is the way to go. Get in touch with us here at Insurance Link and we can discuss which of the covers will be best for you.