Don’t get us wrong, the Accident Compensation Corporation (ACC) is great. It helps in many ways and probably all of us have had times when ACC has either partly or fully subsidised the cost of treatment due to an accident. Some may have also experienced ACC paying them an agreed benefit or up to 80% of our income if not able to work for more than 7 days due to an accident. For the self-employed, you have the option to take an “agreed benefit” called Cover Plus Extra, which means we don’t have to be concerned over proving our own taxable income (which is often less if we are being tax efficient).
But if we reduce what ACC pay out under this agreed benefit, then come claim time, this could become a real issue in our ability to service bank loans, meet our personal guarantees and to actually live our lives, especially the longer the effects of an accident last. And ACC only pays out on accident if the assessment shows that the accident wasn’t part of any degeneration. That is where income protection supports our lives. It either tops up an ACC claim or if no ACC applies (because the claim wasn’t accepted or the cause was from illness), it pays out the benefit being insured for which can either be an agreed benefit (determined at application time) or a benefit that you need to prove at claim time.
Disability styled insurances like income protection or mortgage linked income products are complicated mainly because New Zealand has ACC and private insurance is not the only public funder of personal benefits. But how these types of insurance work with ACC so that there is efficiency of cost and the benefits work well together is critical and requires expert knowledge.
So, do you really need an income protection product? Ask yourself questions such as: Is your income important to you? Who relies on this income? If you cannot work due to an illness or injury, how long can you sustain your lifestyle or a portion of your lifestyle for? Where would your income come from? How long would your income continue for if you couldn’t work for six months, 12 months, 18 months, 2 years or longer?
These are difficult questions to ask yourself, but often there are easy answers. If you wish to know more, call Jason Kilworth on 0212214065 or email jason@nzlifebrokers.co.nz.
Article kindly supplied by NZ Lifebrokers Ltd
