Income Protection

Adviser Corner: Factors to consider when choosing income protection insurance

The ability to earn an income is undeniably one of our most important assets, yet the importance of safeguarding this asset against unforeseen circumstances is sometimes overlooked.

To talk about income protection insurance and the significant benefits this type of insurance can offer, we spoke with our senior insurance adviser, Tony McCombs.

Understanding income protection cover

Income protection insurance is designed to provide a financial safety net if you are unable to work due to illness or injury. Depending on the percentage of your income insured, it will cover that amount for the duration of your payment period. This type of insurance plays a critical role in maintaining financial stability during challenging times, offering peace of mind and security.

The importance of choosing the right policy

Choosing the right income protection policy involves several key considerations. According to Tony, "the type of cover, the amount of cover, the waiting period until the payment starts, and the maximum payment period" are critical components. These factors influence the premiums that you will pay for the cover.

  • Type of cover refers to the specific circumstances under which the policy will provide financial support, such as covering temporary disabilities, major illnesses, or both.
  • Amount of cover determines the maximum benefit payable under the policy. This amount should be sufficient to maintain the individual/family’s standard of living during periods of incapacity. It's important to note that there is a maximum insurable percentage of income, set by the insurer.
  • Wait period determines the duration from when a doctor deems the person unable to work before the policy begins paying out its benefits, influencing how soon financial support will be available.
  • Maximum payment period sets the limit on how long benefits will be paid out under the policy. Whether that’s until you’re able to return to work, retirement age, or a predetermined duration.

These components shape the policy’s cost and it’s important to balance coverage needs with affordability. Tony says, individuals should consult with an adviser to make sure their financial situation and coverage needs are carefully considered.

Pre-existing conditions and eligibility

A common concern when selecting income protection insurance is how pre-existing conditions might affect eligibility. Tony points out that conditions likely to recur, hazardous activities, or dangerous occupations might have special terms or be excluded from the policy.

It's important to understand these limitations and exclusions to choose a policy that best meets your needs. Again, an adviser can help you understand any policy exclusions and to ensure your policy is the right fit for you.

A comprehensive safety net

Income protection insurance can complement other types of insurance policies to create a more robust safety net. For instance:

  • Health cover can cover medical expenses in the event of illness or injury, while income protection ensures a steady stream of income while you are unable to work due to health issues.
  • Trauma / disability cover offers additional financial support by providing a lump sum if you’re unable to work long-term due to medical reasons that meet your policy criteria, such as cancer or stroke.
  • Life / family protection cover provides financial support for dependents in the event the medical condition leads to death.

Combining these various insurance types can help safeguard individuals and families by ensuring there is adequate financial support during difficult times.

Tony’s personal experience

Tony vividly recalls his own experience during a 21-day Outward Bound course in Anakiwa, where he suffered a ruptured Achilles tendon. This unexpected injury underscored the importance of having a robust support system, including income protection insurance.

The insurance provided him not only with financial support but also included a rehabilitation benefit that proved to be a lifeline for Tony. It covered his gym membership for three months, providing him the resources he needed to embark on a rigorous rehabilitation programme.

Tony says it wasn’t just about physical recovery, but also a journey of mental and emotional healing. Through this challenging time, Tony learnt invaluable lessons about resilience and the importance of having the right support, like income protection.

Like to chat?

If you’d like to see how income protection cover might fit into your protection portfolio and lifestyle, call us on 0800 800 400, start a Live Chat or fill in this form to get in touch.


Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.

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