Want Complete Financial Security? Consider Income Protection Insurance In NZ

Date May 21, 2021
Blog category Kiwisaver
By Tina M.
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Many insurance providers offer policies for many of your material assets like home, contents, and types of vehicles. While all of these are fairly important, these assets may also be at risk in the event that you lost your source of income.

In order to pay for these expenses (and other costs at home), it’s important that you keep your job. But what happens when your ability to earn is compromised due to injury or illness? 

Income protection insurance is arguably one of the most important, albeit unpopular insurance policies to get, especially when faced with financial dilemmas. Each policy varies based on the features, benefits, and criteria laid out by providers. Certain factors like budget, lifestyle, and circumstances need to be considered as well. 

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So before you decide on your income protection plan, you should ask yourself the following:

  • Do I need income protection?
  • Do I have enough savings to cover my expenses if I become ill or injured? 
  • Can I survive without income for a certain time?

If you're the breadwinner, and/or you just want a more secure cushion in the event that you won't be able to provide for your family for a while, it's best to consider getting a payment protection insurance. 

Features of Income Protection Insurance

Factors include the type of coverage, wait period, and benefits of your chosen policy. 

You can choose a cover that insures you against accidents, diseases, and injuries, which prevents you from working and earning an income. 

Wait period is the time between the approval of your claim and the date of its effectivity. After such a period, you will be receiving monthly payouts which could be after 30, 60, or 90 days from the effective date. 

There are several types of income insurance in NZ, and the coverage differs depending on your current circumstances.

  • Fixed-Rate - similar to policies offered in mortgages and other insurance types, income protection has a fixed-rate policy where the premium you pay is the same each month. 
  • Yearly Renewable – here, you only have to pay the premium at the end of each year. You can choose to renew your income cover for the following year. 
  • Age-Related – this policy follows the age of the applicant where the premium is usually more expensive for older policyholders than for younger individuals. 

Here are some of the best income protection insurance you can apply for in NZ: 

ANZ Income Protection Insurance 

ANZ’s income protection or their living expenses cover insures you against accident or illness, which could compromised your ability to earn. ANZ provides up to $4,000 payout per month for up to 24 months or 2 years. You can choose the amount you can cover, based on how much you’re earning. 

With ANZ, you can add redundancy insurance that covers your living expenses if you’re unemployed. This is a form of protection that can be used for mortgage or loan repayments. They can pay you an additional $4,000 each month for up to 180 days as per the agreement. 

ASB Income Protection

Aside from ASB’s life and loan insurance policies, they also offer their Lifestyle Security Plan that includes insurance benefits for different types of situations. Among these benefits is ASB’s income protection cover that provides you monthly benefit payments in case of unemployment due to injury or severe sickness. 

You can also apply for redundancy cover, as its monthly sums can be used to pay for other living expenses like bills, mortgage, and many more. 

If you think you need additional coverage for specific situations, you can bundle your income protection with the following:

    • Term Life - get a lump sum payment to cover your financial commitments and dependents in the event that you pass away. You can pay for this benefit early upon your diagnosis with a terminal illness. 
    • Critical Conditions - receive a benefit payment if you suffer from a specified critical condition stipulated in your policy. 
    • Total Permanent Disablement - get a lump sum payment if you become totally or permanently disabled and can no longer find employment. 
    • Family Protection - your dependents get a monthly income upon your passing. 
    • Accidental Death - your dependents get a lump sum payment if you pass away due to an accident. 

Partners Life Income Insurance 

Partners Life Insurance offers income and life income policies that provide monthly compensation if you get injured, sick, or pass on due to old age or accident. This income insurance covers you for a specific term or until your retirement. 

As they offer a tailored income policy, they advise that you talk to their financial agent with free consultation instead of getting an online quotation. This way, you can be guided about the right insurance policy for your situation. 

Given that you need to request a financial adviser, their policies are more expensive than other income insurance providers. But rest assured that you will get the most suited policy for your needs. 

Fidelity Life Income Insurance

Fidelity Life supports those who are having a hard time earning money Their income policy is designed to give you all the essentials and extra benefits you need with inclusions like rehab, hospitalisation, and disability benefit. They also offer coverage for injury, death, and other individual circumstances. 

It’s up to you how much you’re willing to pay monthly, which can go up to $30,000 each month. They also offer flexible payment options where you can choose to pay monthly, fortnightly, yearly, semi-yearly, and quarterly.

Upon your application, you can add benefits based on what you currently need, which includes the following: 

  • Built-In Benefits  
  • Total disability benefit
  • Partial disability benefit
  • Family member support benefit
  • Nursing care benefit
  • Retraining benefit
  • Recovery support benefit
  • Recurring claim benefit
  • Relocation benefit
  • Future insurability
  • Replacement benefit
  • Leave without pay  
  • Optional Benefits  
  • Death benefit
  • Specific injury benefit
  • Specified medical condition benefit
  • Premium waiver

Pinnacle Life Insurance

Pinnacle Life has an online application process where you can get a 10% discount on your first policy year. You can also apply for a joint policy discount that entitles you for a 7% discount, and get as many discounts based on your health and lifestyle. 

As Pinnacle’s insurance application is made online, they also extend its offers to Kiwis who are in Australia, US, UK, Canada, Ireland, Singapore, or Hong Kong. 

Is Income Protection Insurance tax deductible in NZ?

You can be qualified for an income protection tax deduction depending on your chosen provider. This can be categorised under “loss of earnings” where you can claim the cost of income protection if the payout is taxable. Ask your insurer if income protection is deductible that can be claimed as an expense while unemployed. 

For better saving options, compare KiwiSaver Funds using the Glimp comparison today!

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