Let’s be honest – for many of us, insurance can feel like a bit of a grudge purchase. We often question whether it’s “worth it”, mostly because we hope we’ll never need it.
Many of us carry a “she’ll be right” mindset, just assuming things will sort themselves out if anything goes wrong. And we’re usually pretty good at insuring our stuff, like our homes or cars, but not insuring the one thing that actually pays for it all: our income.
But life happens. Accidents, illness, and unexpected curveballs can disrupt everything, and that’s where income protection comes in. It’s not just about peace of mind; it’s about protecting the progress you’ve made and staying financially stable if things go wrong.
What is income protection?
Income protection is a tool that can cover a portion of your income if you are unable to work due to having a serious illness or injury. It’s not about replacing every dollar, but it can be the difference between managing through tough times or facing serious financial stress.
But isn’t that what ACC is for?
Yes, and no. ACC can help provide a financial cushion in the case of an ‘accidental’ injury. But many illnesses don’t occur due to an accident; if you’re off work due to something like cancer, a stroke, or another health condition that isn’t caused by an accident, ACC won’t step in. That’s why income protection exists – to protect your financial wellbeing in the event of something happening.
Can’t I just save up an emergency fund and self-insure?
Having an emergency savings is a wonderful aspect to ensuring your financial wellbeing, however we can often underestimate the real impact long-term loss (a few months and beyond) could have. Substantial savings could be useful for large, unexpected costs, however few of us maintain enough to cover the true long-term impact of loss of income. It’s worth thinking about how long your savings would realistically last if your income stopped tomorrow and, if you’re not sure, an AdviceFirst Adviser can help you run the numbers and look at what’s right for you.
How do I know if income protection is right for me?
This is a question we hear a lot. Everyone’s situation is different, and there are lots of insurance options out there. Income protection is one part of the puzzle, and while much of the emphasis is on ensuring those under protected, there is also such a thing as potentially having too much. Working with an adviser will help you strike the appropriate balance.
When considering whether income protection is a suitable option, we look at the following aspects of your situation:
- What are your liabilities at present?
Liabilities are the debts that you are responsible for and are required to continue paying regardless of your income coming through. The biggest one is a mortgage, but you might have other debts such as a business loan, car loan, or credit cards. - If you were to lose your income for a significant period, could you continue to cover these liabilities?
If the answer is no, income protection might be an ideal option when paired with other insurance products. - Do you have dependents who rely on your source of income?
Your dependents could be children, a spouse, or someone you act as a legal guardian to. Income protection may be suitable if the loss of your income would negatively affect their day-to-day wellbeing. - Do you have a certain lifestyle you want to maintain?
This one considers the ‘nice-to-haves’, the things we spend our money on that bring us joy; hobbies, travel, family activities. Income protection may be suitable if there is a standard of living you wouldn’t be able to maintain if you lost your income.
There are so many insurance options – how do I choose?
Here’s the good news – you don’t have to choose on your own. Upon assessment, many may decide to bundle different products together at the same time. Which ones and how much to take out is a tricky puzzle to decipher. That’s where an adviser can help. First, they’ll get a clear understanding of your personal situation, dependents who rely on your income, and other liabilities you may be responsible for. From there, they’ll recommend a mix of products that suit your needs without overdoing it. Our goal is to give clients confidence without confusion.
What happens if I need to claim?
The claim process might seem daunting, especially if you’re already dealing with a medical issue. It doesn’t have to be difficult, but it’s important to gather as much documentation of your condition as possible.
Here’s a general idea of might you expect :
- You may need to provide proof that you’re unable to work, usually in the form of medical reports.
- You may also need to show proof of income, such as pay slips or tax returns if you’re self-employed.
- Your insurer will require you to complete a claim form and supply identification, like your driver licence, passport or birth certificate.
The time it takes for your payments to begin depends on the wait period you selected when taking out the policy, which can vary between 0 – 90 days.
At a critical time of your life, the claims process can seem overwhelming. But there are many advisers who offer support during this time helping to make the process manageable and more streamlined.
I think income protection might be right for me – what now?
Great question. The best next step is to chat with a trusted Financial Adviser. When you meet with an AdviceFirst Adviser, they’ll take time to understand your goals, financial situation, and the people who depend on you. From there, they’ll guide you through your options, help you make informed decisions, and ensure a smooth and stress-free application process. Our advisers pride themselves on giving all clients clarity and confidence in their insurance decisions.
Speak to an AdviceFirst adviser today
There’s a lot to think about when it comes to protecting your income but, quite simply, your ability to earn is one of your most valuable assets. Without it, everything else becomes harder to maintain. Whether it’s keeping your home, looking after your family, or holding onto the life you’ve built, income protection gives you a financial back-up plan for the unexpected.
Still got questions? Let’s Talk.
Disclaimer: This blog is for informational purposes only and does not constitute individual financial advice
