What is income protection?

At Super-Advice we are about all things financial, but more importantly, helping people understand so they can get ahead financially.

In today’s blog post we share with you things you need to know about income insurance.

What is income protection?

The purpose of income protection insurance is to replace your income if you can no longer work to make that income due to an accident or illness and sometimes even redundancy. The reason we say “sometimes” is that some policies or insurers will allow you to add redundancy to the policy, but it’s mega expensive and it only pays for six months.

What happens if my income stops?

Everything you have in life generally comes from your ability to earn money: Where you live, the type of car that you drive, how much you save, how much you invest, all those things we talk about all come from the engine of income.

So if income comes to a grinding halt, everything stops. How are you gonna pay the bills? How are you gonna buy food? Smart people who have created a budget and been able to save money, should have an emergency fund behind them to carry them.

You can’t rely on ACC
Those that haven’t got insurance or an emergency fund have nothing except ACC.

They can be difficult to get money out of, and it has to be an accident.

You can’t really rely on a sickness benefit

If you get sick, all you can rely on is a sickness benefit from the government but it’s not much and you can’t really survive on that.

What does income protection do?

Income protection is the insurance that you would purchase to ensure that your income will continue to flow, if you can no longer work.

How does income protection work?

You need to decide how much you’d like to be covered for.

The maximum you can ensure yourself for is 75% of your income.

Then you need to decide on a waiting period. How long would you like to wait before the money starts paying?

Let’s say for example, you get crook: after four weeks it’ll start paying or you can choose eight weeks or you can choose 13 weeks and you can actually go longer.

The next thing you need to determine is how long would you like to be paid for?

This is very difficult, as you don’t know what’s gonna happen in the future!

You might have something that keeps you off for a couple of months. You might have something so severe that you are never able to earn money ever again. So when selecting your benefit period you can choose to be covered for six months, one year you can choose to be covered for two years. You can choose to be covered for five years or you can choose to be covered all the way until you are age 65, your retirement age.

What are the costs?

Obviously different combinations of how much cover you want versus how long you want to wait versus how long you want to be paid for all come in at different prices.

Our job is to help you.

If money’s tight, but you want a feeling of protection, we would suggest maybe that you have an eight week waiting period and maybe a six month or a one year benefit period.

If you’ve got some spare money that you can allocate to your insurance protection program, you might want a four week wait and be covered all the way to your age 65.

You don’t have to cover 75% of your income. You can cover as much as you want. That’s just the maximum. So anything underneath.

We view income protection or having income protection like having a force field. It means that you can wander around this world, knowing that should something happen to your ability to earn money and meet your financial obligations. It’s under control because you’ve got your income protection policy.

That’s a wrap

So what do you think? Have you got a better understanding of what income protection is? Do you think you will grab yourself some?

If you need any financial help or advice please get in touch with us at Super-Advice.

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