You insure your home so why wouldn’t you insure your income?
98% of kiwis insure their homes and thank goodness because it’s a very valuable asset for all home owners. But if you are in your 30’s your home probably doesn’t equate to one quarter of the value of your future income.
Quick maths! YAY MATHS! At 30 years old with earnings of $75,000 per annum your future income is worth $2,625,000 if you retire age (65) not including pay increases, inflation etc.
The average house price in Lower Hutt is around $640,000.
Income protection products vary between providers but here are the nuts and bolts:
- Monthly benefit paid when you cannot work through to sickness or injury
- Benefit amount is normally determined by a percentage of your gross income
- It could pay you through to retirement age if you are unable to return to work
So why are Kiwis so reluctant to take out an income protection policy? Let’s have a look at the feedback I often hear.
It’s expensive
I don’t understand it
We have ACC!...
First off I agree with the first two, I wish that the products were more affordable and simplified. But we can’t create new products that do not exist, that’s not our role and cost can be a matter of perspective. As we’ve shown above your income is most likely more valuable then your home and it’s most likely that your income protection policy will be half the cost of your home insurance (possibly less).
These products do vary between providers and have nuance to them . But in the words of Peter Griffin “this is why we’re here”. Utilise a broker (ideally Life Insurance Plus) and have the products broken down and explained to you.
ACC is commonly misunderstood especially among young adults. ACC can be great! I grew up playing rugby among other sports as most Kiwis did so I have had my fair share of ACC claims, and even two surgeries under ACC. They have taken great care of me in the past.
But ACC is for ACCIDENTS, you will need other care in the future and it is the most common argument we hear when people are unsure if they need Health Insurance as well as Income. You may require surgery that has nothing to do with a accident (plenty of elective surgeries for knee and hip replacements) and they do not cover you if you get ill. Half of all kiwis report having a disability from a long-term condition (lasting more than 6 months), cancer risk in NZ is high, 3.3% of men and 1.9% of women between 55 and 65 are diagnosed with a stroke, 10.3% of men and 6% of women are diagnosed with serious heart conditions before retirement age.
In addition to this some products that will top up your income from the 80% from ACC. Often vital if you are self-employed and your taxable income does not represent your earnings.
The application process for these products is extensive and you must disclose all prior health events. The longer you wait the less valuable the likes of Income and Health protection products will be for you as your pre-existing conditions pile up.
We are an under-insured nation, that means a nation taking on unnecessary risk with their lives, health and incomes. As kiwis often do not save as they should, we have a habit of thinking “bad things won’t happen to me” when that is out of your control. The statistics don’t lie so it’s time to really consider what you value and what risks your are willing to take.
Get in touch with me today to have a quick chat and a free coffee.
