Income Protection Insurance 101: What you need to know

What is income protection insurance?

Income protection pays you out a monthly income if you are unable to work due to a sickness or disability in your usual occupation for more than ten hours per week and not working in any other occupation.

How does income protection insurance work?

  1. Firstly, your monthly benefit is what you will receive, when on a claim, which is based on 75% of your income. As an example, if you are on $80,000 per year, 75% of that is $60,000 which means your monthly benefit will be up to $5,000 per month.
  2. Secondly, the wait period, which is how long you have to wait before you start receiving your monthly benefit. You have a choice of six different wait periods: four weeks, eight weeks, 13, 26, 52, or 104 weeks. The longer the wait period, the lower the premiums.
  3. The third and final piece is your payment term, that is, how long your monthly benefit will go on for as long as you are off work due to disability. Now you can have a 2-year benefit term, 5-year benefit term to aged 65, or, to aged 70.

    For example, if you are 40 years old (or 40 years young!), and you have become disabled with a benefit term to age 65, you will continue receiving your monthly benefit till age 65, as long as you are off work. On the other hand, if you had a two-year benefit term, your monthly benefit will stop after two years, even though you may still be off work for more than two years.

Why is income protection insurance for you?

Your ability to earn an income is your greatest asset because that is what allows you to keep a roof over your head and to continue to live the lifestyle that you are satisfied with, while fulfilling your wants and needs.

Now, a word of caution, there’s a lot more to income protection than the basics. There are different types of disability products, with different options of working out your monthly benefits, as well as varying tax implications. So it is important to ensure that your income protection is structured properly for your requirements and that you do get the right advice.

I’d like to leave you with this final thought: how long would you be able to maintain your current lifestyle if your income stopped tomorrow?

If you’d like to review your current policies or would like to have a chat to see how a tailored income protection solution can benefit you, please, call Lifestyle Solutions on 0800 477 488, email us at info@lifestylesolutions.co.nz, or send us a message.

Our team is looking forward to hearing from you soon.

Our Satisfied Clients Are Saying...

  • Richard has been my risk management insurance broker for 5 years now. He is so approachable and helpful with any of my questions about insurance or claims. Nothing has ever been a problem and all claims are dealt with quickly and so easily. Richard specialises in working out the very best insurance for my lifestyle situation. I would highly recommend Richard to anyone who needs to get cover or update their insurances.

    Maria P.
  • We first opened our door to Richard some 8 years ago now. We found Richard to be genuine, straight to the point but not over bearing nor abrupt. We were looking at changing up our insurances to find something that suited our family and finances better. Richard put us straight on the right path. We find him reliable, honest and easy to chat with. Richard has also given us fantastic financial advice which has helped us save for the future. We have recommended his business to our friends before and will do again happily in the future.

    Dyson and Karina P.