Living with a disability is not fun. If you have ever broken an arm or leg, you will have an idea about what it might feel like, though only over 6-8 weeks usually.

Most medium and long-term disabilities involve mobility issues or cognitive problems, including depression and mental health.

In the pages Managing Debt – Paying for it, reducing it and eliminating it & Surviving a life changing medical event like a heart attack, Cancer, Stroke, Paralysis etc. we have talked a bit about short and long term disability.

Additional to the disability itself, there are a number of other things that you face immediately.

  1. How are you going to pay your bills and cover your expenses?
  2. How are you going to cover additional costs associated with your disability?
  3. How are your retirement plans going to fare if you are disabled and your contributions stop for an extended period?
  4. What about your job and business? Business wise we talk about this more here
  5. What if you never get better?

1. The first is relatively straightforward; you have some form of income protection to replace your income and enable you to pay your expenses.

Depending on your situation this may be called income protection, it may be mortgage protection or household expenses or it may be a combination of all three.

You will also have ACC involved if it is an accident, but they will only get you through the initial recovery from the original injury and back to work any job they can. Income protection is about your own job and your ability to do that and go back to that and not another one.

The combination of Income Protection, Mortgage Repayment Insurance and ACC will replace your income up to 75 - 80% of your gross taxable earnings, you will have to pay tax on it. Some policies pay at a lower level, taking into account tax, and you do not have to pay tax on them. We will talk to you about what is most appropriate for your situation.

2. Covering additional costs with your disability can be a challenge. Most income protection policies pay at a level less than your income, so you have a financial incentive to return to work.

There are short-term options with booster or extended benefits. These are often optional extras and come with quite a jump in premiums. They will boost the claim payment to 100% or close to this for the first few months of your claim.

The other option is a trauma or critical illness cover if your condition is sufficiently severe enough for a trauma claim. This would pay a lump sum you can use for what you need, like disabled access for ramps, toilets etc.

3. If you faced a long-term disability then you need to consider what would happen to your retirement savings. Income protection benefits are designed to replace your income from point of disability until your return to work or reach retirement age. From retirement age, you will be dependant on your retirement savings.

If you already have a retirement savings plan, we can insure some or all of your contributions to your plan if you are disabled. If you have started a retirement savings plan after you took income protection we may be able to add it to your current plan without too much hassle, have a chat with us.

4. So what about your job. If you are an employee, you will have a certain amount of sick leave and you should be in discussion with your employer about your prognosis to protect your ability to go back as best you can. If you are going to be disabled long term, your employer will want to get on with hiring a replacement. The reality is they will survive without you; you need to focus on your own recovery.

If you are self-employed, then there are other considerations to think about and we discuss them here.

5. What if you never get better? This is what we call total permanent disability. It is both a situation and a product.

With total permanent disability, we can insure you for a lump sum amount if you are so disabled that you will never work in your own occupation ever again. There is an any occupation version but we prefer not to use this unless we have to.

TPD as it is called, can be used to ease your financial challenges. By paying off debt we remove the debt servicing burden on your income, this then allows the possibility of you maintaining your lifestyle prior to disablement with the reduced income you get from your income protection benefit. This isn’t to say your income protection gets reduced, just my earlier point that insurers insure less than your full income. In a lot of households 30-40% of the income is spend on servicing/paying for debt, by using TPD to pay this off we can effectively give you a 30-40% pay rise when on claim which the insurance company can’t offset. (Some considerations with Mortgage Protection do need to be discussed).

With this benefit we can also look to fund the lost income of your partner or family member who has to give up work to look after you, though this can start to get expensive premium wise.