With your house, contents, car and life insured it feels like you are covered from all angles … but what happens if you fall sick and are unable to work? Income protection insurance may be something you've heard of in passing, but what does it cover, and what are the benefits of having it? Is it time to start thinking about taking it out for yourself?
What is income protection insurance?
Should something happen that stops you from being able to bring in an income, this insurance can cover you up to 75 per cent of what you've been earning. The difference between income protection insurance and ACC is that ACC only covers you for accidents. Should you become too ill to work, or suffer a trauma and require long-term care, ACC wouldn't apply. Instead, this is where an income protection policy would kick in.
When is the best time to take out income protection insurance?
Any time that the loss of income would leave you unable to pay your bills and support yourself. If you have a mortgage, have to pay rent, or a family relying on you, income protection insurance is especially important. You may want to consider life insurance as well.
There are generally two different types of income protection policies, and each have different tax implications and benefits.
Talk to your insurer about waiting periods, and the length of cover, as they both impact a policy's premium. The waiting period is the amount of time that will need to pass before your policy begins making payments. Cover can last a fixed time frame, or extend all the way to retirement.
If you need to know more about how a income protection policy may benefit you, reach out to us at Money Empire.