A good question and one that is often misunderstood when it comes to income protection.
It’s also been coming up in conversations more recently, suggesting there’s some job security sentiment developing.
In New Zealand there are five situations that impact your ability to earn an income.
- Your disability due to a medical condition
- Your disability due to an accidental injury
- You being subject to a forced redundancy
- You choosing to quit your job
- Disability of a family member requiring you to stop work for an extended period.
The first two are where your typical income protection policy operates. In the situation of an accidental injury causing disability, ACC will also be involved. ACC may be the primary support, both medically and financially, though your income protection provider will likely still be involved.
This blog article - Redundancy when do you need to have it? - explains more on redundancy specifically, but as a general rule, under the age of 45, redundancy protection for just your mortgage payments for 6 months is likely to cost more than insuring your whole income for disability.
You can look at it as a higher risk, and yes that maybe true. Though the experience I've had with our clients, they claim on their income protection far more than they get made redundant. So choosing to add redundancy to your income protection rather than just redundancy protection is our recommended approach.
In the case of you quitting your job, unfortunately there's no insurance cover for this. Income insurance isn't an unemployment benefit, that's what WINZ provides, though not nearly at the level most people earn.
The last point, giving up work to care for a disabled family member. This also happens more often than people realise. We have one provider where; if a close family member is disabled and you have to give up work to look after them, they can pay a claim. This benefit will pay up to 75% of the insured benefit for up to six months (with terms and conditions). Very useful if you have to stop work to look after your sick wife or husband.
The caveats on this benefit are, the one who is disabled must have been working in paid employment, so it doesn't cover you for sick kids or those in unpaid roles. Also you need to have used your outstanding sick and annual leave.
Hopefully this article has expanded your understanding about protecting your income, if you want to learn more, The Income and Mortgage Protection Section is useful.
If you want to dive in and find out what the best answer for you is, give us a call and we'll discuss a tailored plan for you.
The information is only intended to be of a general nature and should not be relied upon in any part without obtaining full details of the products and services by contacting Willowgrove Consulting Limited. All product and service details, terms, conditions and other information are subject to change at anytime without notice. Terms, conditions and fees apply to the various products and services and are available on request. A disclosure document will be provided to you on request free of charge.