Category Archive: Income Protection Insurance Articles

The Benefits of Using An Insurance Broker

The usual places to buy income protection is either from a broker or from a bank. Buying income protection from a bank usually means buying other services too. Banks include income protection along with other pay services when they process loans such as mortgages.

If you were to walk in off the street and ask just to buy income protection from a bank, it is very likely that they would not be able to sell you income protection. Utilizing the services of an insurance broke eliminates the need to buy multiple products or services to obtain income protection insurance.  Most brokers if not all will simply sell you a policy.

Benefits of Using A Broker

It also makes sense from a consumer point of view to deal with an insurance broker because they are used to dealing most if not all of the aspects of the policies that they sell. That is not always true of banks. Buying insurance can be a complicated ordeal. Using the services of an insurance broker can help alleviate the frustrations of filling out long applications.

Insurance agents are professionals who make their living by helping people find the coverage that they need. It is that professionalism that makes insurance agents the better choice for people who are looking for insurance protection.

A powerful benefit that is gained when consumers use an insurance broker is that most insurance companies offer many different types of the same insurance policy. Independent brokers may represent many different underwriting firms. This means that using an insurance broker can add variety and value to the consumer. A bank usually sells their own brand or a partnering companies brand of insurance. That single type of policy is not always the best choice every consumer.

Income insurance can be complicated, and that is yet another reason why using a broker is beneficial to the consumer. There are benefits that consumers should think about adding to their income protection plan. One example is whether or not the consumer wants the policy to pay its own premium in the event that a claim is filed and paid.

Sitting down and talking over policy options with a broker can help consumers find all policy add-ons that they may need. For those of you who are not familiar with how income protection works, consider the following.

How is Annual Income Determined?

Income protection pays a monthly payment to the policy holder in of a disabling injury or illness that is not work related. The monthly payment is based on the policy holders annual income; however, how the annual income is determined can be complicated. Using a broker will help consumers to find the best policy. Some policies use a formula that basis current annual income as a combination of the last 36 months of income. They then pick the lowest 12 month segment to determine annual income. A broker can help to explain how annual income is formulated and whether or not one policy formulate annual income higher or lower than another policy.

There are other considerations and policy choices that consumers many need a broker to explain. For example, sometimes an income protection policy covers only a specific job. If you are promoted to a new job, your income protection may not cover that job or changes in income. Being able to decide if your policy should cover a specific job title or all job titles is important.

Policy length is also a critical aspect that should be discussed with a broker. Some income protection plans cover the holder until they retire at age 65. Other income protection policies may only cover the holder for two, five, or ten year periods.

Different types of policies pay different amounts. Indemnity policies pay 75% of your current annual income to the holder; whereas, an agreed value policy pays a predetermined amount that the policy hold is aware when they take out the policy. With an indemnity policy, you may be paid less than expected if you have had a drop in income. The key word is current annual income. Finding the tricky language that is contained within a policy is also something that a broker can help consumers understand.


There are many reasons to use a broker when shopping for income insurance. The variety of types of policies offered is one of the major reasons to use a broker. Consumers who want income protection can find that a broker can help them to navigate the confusing and complex process of buying insurance.

Rural Farm Workers and Salary Cover

Income insurance for farmers is sometimes called rural income protection. Income protection is an insurance policy that protects the annual income of workers, including farmers, in the event that they become disabled due to a non-work related illness or accident.

Farming is unlike most business or jobs, and for a long time it was difficult for farmers to obtain income protection insurance because of the way that crops and livestock are sold. The problem was that farming income is not a monthly or biweekly scheduled event. Crops and stock are raised and sold seasonally or even annually, and as such, farmers do not have a monthly income. Insurance companies require a monthly income to qualify for income protection insurance which was a problem when farmers income are considered on an annual basis. Fortunately for many farmers, the industry has begun to recognize the income of farmers and policies that protect the income of farmers are available.

Why is This Important?

Currently as a nation, only 11 percent of people take advantage of income insurance. Farmers know that without an income farms fail. If an injury or illness prevented a farmer from working their land, the downward financial spiral would likely spell disaster for the farmer, his farm and his way of life.  According to statistics from the New Zealand government, upwards of 50% of working men will likely experience a disabling event before they reach the retirement age of 65.

The older we become the more likely it is that we will suffer a disabling event. With advances in modern medicine diseases and injuries are being successfully treated on a higher and a higher percentage basis. What this means to someone has suffered an injury or illness that causes the patient not to be able to work is a much longer recovery time. This is exactly why many people believe income protection is important.

What Should Farmers Expect From Insurance?

To start off with, farmers should expect a monthly payment from the insurance company. Sometimes this payment is weekly, though most of the time it is monthly. In the case of partial recovery, some policies offer a partial disability level of benefits.  Since income protection is designed to protect your annual income, expect that the insurance company will divide up  your annual income into monthly or weekly benefit payments. Expect that the benefit payments will last for the term of your policy or your recovery from your illness or injury.

What Should Farmers Look For When Choosing a Policy?

Consumers, not just farmers, need to pay close attention to how the insurance company figures out annual income. Because farmers are paid annually, income can change drastically from year to year. Determining how the insurance company figures out annual income can make a big difference in how much benefit is awarded monthly. It is important that farmers and other consumers shop the insurance market. Do not just rely on one estimate before you decide on which policy to buy.

Be willing to read the policy over completely not every insurance company offers a square deal. Some may only offer benefits based on 20% of your annual income, while other companies may offer benefits based on 30% or more of your annual income. The difference can mean hundreds or thousands of benefit dollars each month. Make sure that your policy has what is called a recurring disability benefit clause. What this does is it eliminates the qualifying period for injuries or illnesses that reoccur. This means that you do not have to wait for a period of time to be compensated. The insurance company simply begins benefits immediately.

One of the important features in an income protection policy is the length of the policy period. You may want to consider carefully if purchasing a short term policy that expires in five or ten years is right for you or not. Remember that income protection is about protecting your income for your entire working life, not just a short period of that working life.


(This article and all articles on this site are not to be taken as professional insurance advice, for such advice please speak to a registered insurance broker. We can connect you with a broker by using the form on this site.)


Income Protection Cover for Doctors

Doctors and other healthcare providers are just as much at risk for disablement injuries or illnesses. Due to the high cost of medical school and the financial burden assessed by the repayment of student loans, income protection for doctors is not an option. Despite the offering of insurance coverage to protect incomes within New Zealand, only 11% of the population has taken the initiative to purchase income protection insurance coverage.

Why Income Protection is Needed?

Income is an asset that is commonly measured by year. The reality is that income should be looked at over the span of a working lifetime. That range is typically from age 18 to age 65. If we consider that time frame under a financial lens, then we see that, over a working lifetime, our income becomes our greatest asset. This is exactly why income should be protected by insurance. A doctor who likely will make $200,000 annually can expect to make from age 30 until age 65 about $7 Million Dollars in the 35 years they work before they hit retirement age. That $7 Million Dollars should be protected against loss due to injury or illness that leave the doctor disabled.

The Benefits of Purchasing A Policy Early

The benefits of purchasing income protection early are important considerations especially when those considerations also include the limitations of both income protection insurance and ACC benefits. We talk about limitations in coverage because of how ACC and Income protection Insurance limit coverage of pre-existing conditions.  Beginning coverage earlier in ones life helps to eliminate limitations of coverage because of pre-existing conditions. This is true because there is less chance for a pre-existing condition to occur, when we are younger. As we age, our bodies change, and health issues begin to emerge. Having income protection coverage in place, prior to our bodies developing medical issues that may either be considered degenerative or a considered pre-existing condition is beneficial.

Some Differences Between ACC and Income Protection Insurance

ACC is even more restrictive because ACC considers your level of health at the time of your disability to be the benchmark for release from benefits.  For Doctors, who are subject to all kinds of exposure risks, and potential injuries that can cause disability the benefits of income protection insurance may in some cases outweigh the cost because the potential for lost income is not only high in terms of dollars but high in terms of risk. Income protection insurance is designed to protect what is likely to be a doctors largest asset, their earnings over their working lifetime. The above example should provide the motivation and the example of why income protection is something to consider.

New Zealand Statistics

Statistically, only 11% of the nation has thought about income protection beyond what is offered by the government through the ACC program. Those 11% are ahead of the game because they have stopped relying upon the government to provide for them.  They  have taken it upon themselves to plan for their own financial well being. For doctors, this is just as important because to maintain that lifestyle is difficult without that level of income. Income protection is one type of insurance policy that professionals do not readily take advantage of.

Many people buy health insurance and then leave their financial protection up to government programs or simply go without protection. Without an income how do we continue to recover from injury or illness? Income protection is insurance the provides a monthly payment when people are unable to work due to a qualifying disability. 89% of working individuals leave their financial well begin to chance while 11% of individuals take the preemptive opportunity and plan for their financial future by protecting their income with income protection insurance.


This article and all articles on this site are not to be taken as professional insurance advice, for such advice please speak to a registered insurance broker. We can connect you with a broker by using the form on this site.)

How Does ACC Cover Work?

Income protection and ACC work in a very similar fashion and yet both are needed. Because they both work to provide income in the event of non-accident causes of disability injury, which occurs outside of work it is important that consumers understand how they differ and why they are both important. Please note that we advise you to speak with a professional FMA registered insurance adviser before making any decisions about ACC of income protection.

The Difference between Income Protection and ACC

The first difference is that everyone is eligible for ACC because ACC is provided as a benefit from the Government. This is different from Income Protection Insurance cover which is a policy that consumers must buy from a qualified insurance broker.

Another difference is what income protection and ACC cover and how long they cover each incident. The primary difference in coverage is that ACC measures your health including pre-existing conditions to establish your normal health and Income protection measures your health at what would be considered normal health. This means that ACC looks differently at pre-existing conditions and health issues that can be lumped into degenerative disease. In fact, ACC considers that the average person is cured once they return to a state of health before their injury.  The key phrase there is “before their injury.”

Case Study Scenario (fictitious)

Lets look at a typical case study example and say that a person has degenerative joint disease that effects their knees. They are within the working age group and falls while at home injuring their arm and shoulder. ACC views this as a cover-able event and provide benefits until the arm is healed.  ACC does not consider the degenerative joint issue with the knee as a cover-able event because it is considered to be pre-existing. Even if the knee becomes worse it will not be covered by ACC or not covered by ACC for very long.

Once the patient returns to what ACC deems as normal health, the patients claim ends. So in this case once the arm is healed, regardless of the condition of the knee, the patient has returned to their state of health before the arm injury. If the knee and joint degeneration were caused by a prior accident that was covered by ACC then there is a chance that the knee would be considered a covered event, but again, that is a change not a guarantee.

This is an important difference between ACC and Income Protection Insurance. If we examine the same case scenario, and apply the benefits of income protection insurance the outcome is different. So the patient, who has bad knees falls and injures their arm. They activate their income protection insurance benefits and are paid up to 75% of their income until they can return to work.

If their arm heals and they regain function, but their knee is not permitting them to work then the claim continues. Even Income Protection Insurance will limit coverage based on pre-existing conditions, but the true difference between Income protection coverage and ACC is that income protection insurance does not see degenerative conditions as a pre-existing condition.

Evaluating Coverage and Benefit Period

Because of the way that ACC views pre-existing conditions and health issues that are degenerative it is important that younger people not only understand these limitations but that they take the initiative to plan ahead for natural occurring health issues and purchase income protection insurance. The earlier that they are covered the better because they reduce their risk of losing benefits if they develop a degenerative condition. It is also important that consumers not rely on the government and become proactive in managing their own financial affairs by considering the benefits of programs such as income protection insurance.

Why Income Protection is Needed

In short, ACC should not be relied upon as the only means to protect income because of the specific way that ACC views a patient’s normal health status. Consumers should also not rely upon government programs for their financial well being. The above example shows how easy benefits can come to an end regardless of whether or not the patient can return to their job in their full capacity.


(This article and all articles on this site are not to be taken as professional insurance advice, for such advice please speak to a registered insurance broker with the FMA. We can connect you with a registered broker by using the form on this site.)

What to Consider if You’re Self Employed

Until recently, income protection insurance for the self employed was simply not available. The opportunities created by the poor economy have increased, and many people are taking these opportunities and starting their own businesses.

With corporations looking at ways to save money, and employee benefit packages that are shrinking, a few insurance companies have realized the market opportunity that exists for the growing population of self employed people.

Start Up Income Protection Insurance

Start up income protection insurance is designed for businesses that are new. Usually this means that the business is less than thirty-six (36) months old. Like other forms of income protection insurance, this policy type pays a monthly stipend if the insured becomes disabled through illness or injury, and can no longer work.


・ Maximum length of policy is usually up to 36 months. Not all companies offer an upgrade at the end of the 36 months. Some carries do offer extensions, but the policy converts from an agreed value to an indemnity policy. Some carriers have shorter periods so consumers are wise to shop around.

・ Self employed income protection insurance is almost always an agreed value policy type. Consumers should pay attention to the details of how the agreed value is calculated. Sometimes the agreed value is based on the 36 months of work history prior to beginning the start up business. If the company is growing rapidly, the agreed value does not change automatically. Coverage can range from $1000 per month to $9000.

・ The maximum age for self employed income protection is usually 55 years old. Some providers may extend the maximum age limit.

・ Wait periods are predetermined, and the consumer should have a choice of several different wait periods.

・ Consumers should pay close attention to the wording that covers re-injury. If the policy holder has been disabled and received pay outs under their income protection policy, but is released to resume work and then becomes disabled again, then it is important to understand how that process works under your policy. Some policies will waive the wait period, but there are usually restrictions.


Consumers should look for any of the following positive benefits when shopping for income protection.

・ Will the policy pay its own premiums if you are disabled? Some policies will pay the policy premium if there is a pay out situation. This will help the consumer to cut monthly expenses if they become disabled.

・ Will the policy automatically renew if there is a claim? Not all policies renew automatically. Automatic renewals are good, but consumers should make sure that their policy will renew automatically if a claim is in progress. Insurance companies will find any little excuse to drop a policy that is costing them a monthly pay out.

・ Will the policy convert to another policy type once the maximum age limit is reached. Most self employed policies have a maximum age limit of 55 years old. Retirement age is 65 years old, and consumers should look for a policy that will convert to a policy that will cover them until they reach age 65.

Agreed Value VS Indemnity Value Cover

If the consumer is given a choice of either an agreed value policy or an indemnity value policy, than the following considerations should be reviewed. The major difference between the two policy types is how much they pay out on a claim. An agreed value policy pays out 55% of your gross annual income.

The key word here is income, which does not just include salary, but also dividends, etc. The primary benefit of an agreed value policy is that the pay outs are usually not taxable as income. An indemnity policy pays out 75% of gross annual income, and like the agreed value policy, income also includes more than just salary. For both policy types, consumers should pay close attention to how the gross annual income is calculated. Most of the time, the calculation is not your highest income year, it is the lowest.

Insurance companies may take an average of the last 36 months of income and then choose the lowest income period as your set gross income level. That may not seem important, but when you consider that the pay out is going to be either 55% or 75% of that calculation, how they determine gross income becomes very important. See Below:

If, in year one, you made $15,000, in year two you made $17,000, and in year three you made $20,000, than many of us would assume that our gross annual income is our last years wages of $20,000. From the insurance perspective, they may average those three years and come up with $17,333 as your gross annual income.

The difference between 75% of those two incomes is substantial on a monthly basis. At $17,333, your monthly income will be $1062, but the monthly income at $20,000 gross annual salary range is $1250.  That is a significant difference that can be realized simply by examining how the policy provider determines gross income. Before you sign up for an insurance policy you need to talk with a FMA registered financial adviser who will provide advice for you. If you would like to be connected with an adviser please submit your details through this page – Get Advice


(This article and all articles on this site are not to be taken as professional insurance advice, for such advice please speak to a registered insurance broker. We can connect you with a broker by using the form on this site.)

The Best Policy for Your Employees

Income protection as a benefit to employees is one of the better perks of working for a quality company. One of the primary reasons that income protection is important for companies to offer is that not every individual is eligible for income protection outside of a corporate benefit package. In this article we will look at:

・ Some of the reasons why income protection is a good option.

・ Some of the benefits to employers that offer income protection to employees.

Some of The Reasons Why Income Protection Is A Good Option

First, income protection is one of the most underutilized forms of insurance available to both businesses and to individuals. As a business that employees workers, and allocates resources to train them, income protection is much like an insurance policy for your investment.

If one of them became disabled, used up all of their sick time and disability insurance, than income protection would pay a portion of their income until they were able to return to work. If they are able to return to work than the employers investment is not lost. It pays to offer income protection to employees because income protection allows a disabled employee to survive without all of the financial worry that would go along without income protection.

Second, Offering income protection as part of a benefit package shows employees that the company cares enough about them to provide for their future if something catastrophic should occur. Say an employee becomes disabled and uses all of their sick time, vacation and runs out of disability insurance. The fact that income protection will pick up where disability leaves off makes a business that provides such benefits a hero. It solves the problem of what to do without having to walk away from someone who is in a bad situation. After all, it is unlikely that any business would just continue to pay an employee who is disabled.

Some of the Benefits To Employers That Offer Income Protection To Employees

Perhaps one of the biggest benefits to employers that offer income protection insurance to their employees is the fact that the premiums are tax deductible. This is also one of those employee benefits that normally is not considered taxable as a fringe benefit. They key word is normally, because the New Zealand tax laws change often regarding income protection. Because of the frequency of change in the tax laws, the tax benefits should be checked annually.

Another benefit to employers the opportunity that creating trust between employer and employee can be a positive experience. Income protection is one of the vessels by which an employer can demonstrate that it cares about its employees. When employees feel like they are cared for their productivity rises, their loyalty to the company rises, and the value of your workforce increases.

Statistically, employee related income protection claims typically last about one year. That is a long time to go without receiving a pay check. If we go back to the investment that employers invest in workforce and labor, than it is easy to see why income protection as a benefit is important to both the employee and the employer.

Income protection has been part of the leadership benefit package for most larger corporations for many years. The cross over of income protection from executive to standard employee has been increasing over the last several years. The primary driving force behind this trend is the investment in, retention and attraction of high-quality employees.

The government, too, has stepped up and made the premiums a tax deduction. This take the burden of civil welfare off of the government which frees up tax money for other expenses. The average cost of premiums is about 1% of annual payroll. Income protection as a corporate benefit is usually available for groups with more than ten employees. Not every industry or job position may qualify, but that is mostly because of the nature of some jobs.

Insurance is about risk and high risk positions may not qualify. Employees care about income protection because in the event of a claim, employees can be paid up to 75% of their annual salary. Quality income protection plans will have language that discusses partial disability and even back to work programs. It is my hope that this article has provided quality information that will help readers to understand why income protection is not only important, but also a positive and beneficial part of any benefit package.



(This article and all articles on this site are not to be taken as professional insurance advice and information may not be accurate, for insurance advice please speak to a registered insurance broker. We can connect you with a broker by using the form on this site.)

Income Protection Insurance vs Life Insurance

Income protection and life insurance are two very different types of catastrophic insurance. Both are beneficial, and both are necessary, but for very different reasons. Of the two, income protection insurance is probably the most misunderstood. On a general note, the difference between life insurance and income protection insurance can be summed up as life insurance pays out a lump sum if you die and income protection insurance pays out up to 75% of your annual salary if you are unable to work due to illness or injury. Income protection insurance is not life insurance, and life insurance is not income protection insurance. Lets look a bit closer at each and find the reasons they are different.

Life Insurance

There are many reasons why people buy life insurance. The primary reason is to provide a lump sum of cash to a surviving spouse if the other spouse should die. The idea behind life insurance is to provide a replacement for future income or lost salary if the unthinkable should occur. This is one of the reasons why life insurance is often confused with income protection insurance.

Life insurance comes in three basic forms. Those forms are typically called, Term Life Insurance, Whole Life Insurance, and Return of Premium Life Insurance. Each policy type functions in a different way.

Term life insurance covers a specific period of time. For example, a term life policy may cover the next 20 years and then it will expire. If you, the policy holder, should die within the covered period the policy pays out a lump sum. If the policy holder, should live past the coverage period the policy ends without a payout.

Whole life insurance covers the policy holder for all of their life. There is no expiration date for the policy as the name implies, this type of policy covers the holder for their whole life. This type of policy usually has a higher cost associated with it because there is a pay out. The policy will only lapse if the holder fails to make the monthly payment.

Return of Premium Policies are a mixture of both a term life policy and a whole life policy. They work on a specified time period like term life insurance. If the policy hold should outlive the policy coverage period, then the policy returns all of the premiums that were paid for the policy. It may seem kind of odd, but the insurance company has been able to invest the premiums that were paid in for the length of the policy. They have had an interest free loan.

Income Protection Insurance

Income protection insurance is different from life insurance. Even though, some of the philosophies around life insurance may be to recover lost income in case of death, the two policies are different. Income protection is designed to insure your annual salary. It is insurance against the lost of your income. The primary difference between income protection insurance and life insurance is that with income protection policies you the policy holder are still living. Income protection works in conjunction with disability insurance by paying out up to 75% of the annual salary of the policy holder. The pay out occurs only if there has been a qualifying illness or injury that prevents the policy holder from working. This type of insurance is designed to help the policy holder to pay their mortgage, and meet other financial obligations while they recuperate.

Not everyone needs a life insurance policy, but everyone who works should have an income protection policy. Throughout our life, our income is usually our biggest asset. Income protection insurance is used to recover wages if we become sick or injured and can no longer work. An example would be that an injury occurs, and it takes the next three years for the injured party to recover enough to go back to work. An income protection policy will pay 75% of the salary for each of those years. Life insurance for the same scenario will pay nothing.

Income protection policies are sold for specific periods such as one year, ten years or until the holder turns 65 years old. New Zealand changes the tax laws that govern income protection fairly frequently. Choosing the right kind of income protection policy can mean the difference between paying taxes on payouts and not paying taxes on payout. It is best to sit down with a financial advisor who would understand the current laws governing income protection.



(This article and all articles on this site are not to be taken as professional insurance advice and information may not be accurate, for insurance advice please speak to a registered insurance broker. We can connect you with a broker by using the form on this site.)

Insurance Companies and Their Rates

Income protection insurance has become more popular as people begin to realize how important it is for protecting our life style and way of life. For those of you who are not familiar with income protection insurance, this is a type of insurance that protects your income if you should become ill or injured and are no longer able to work. The policy will pay you up to 75% of your annual income, but there are restrictions. Below are a few of the companies that offer income protection insurance in New Zealand along with a little bit of information about each of the companies.

NZLife. An online source for Insurance for Kiwis: provides insurance through Sovereign Assurance. The website offers life insurance, accidental death insurance, critical illness insurance, total permanent disablement insurance, and income protection insurance. The website offers a premium calculator to help shoppers see an estimation what their premiums are going to cost. NZlife is a member of the Institute of Financial Advisers. The site has many beneficial links that consumers can click to get to know the company and the products that they offer.

Lifebroker New Zealand: is an online portal that links consumers with information about income protection insurance that is offered through Lifebroker of New Zealand. The website posts a guarantee that says they will match or beat any quote.  There income protection page is not very comprehensive with only a generalized statement that indicates their income protection plan will pay up to 75% of your annual wages if you become disabled and can not work. The third click on the page takes you to a page that has even less information but offers you a toll free phone number for a quote. The income protection page offers a small fill in the blank form that indicates they may offer several types of income protection policies, but it is not clear. There is not a calculator that helps consumers to determine approximate costs. This means the consumers will have to be called by a broker to go over differences in policy types and to receive rates.

CIGNA: New Zealand’s Income Protection Insurance: offers shoppers income protection insurance along with trauma insurance, accidental death insurance, life insurance and identity theft insurance. One of the interesting options that is listed on their website is that consumers can choose the amount of benefit up to $2500 per month.  They also list that the benefit paid out is on top of any ACC entitlements that the claimant may receive.

CIGNA New Zealand is one of the many companies that make up CIGNA corporation which is also a member of the Fortune 500 companies. They offer their insurance policies under the CIGNA name but you may also find that you find CIGNA policies sold by brokers or independent brokers within New Zealand.  The payment history of the company is rated as an A, which translates as EXCELLENT by A.M Best Company Inc. The rating was received in December of 2011.


A++ Superior B+ Very Good C Marginal
A+ Superior B Adequate C- Marginal
A Excellent B- Adequate D Very Vulnerable
A- Excellent C++ Fair E Under Supervision
B++ Very Good C+ Fair F In Liquidation

Inform NZ: Provides Health Insurance, Life Insurance, Income Protection …

Westpac: New Zealand Income Protection Insurance: Offers income protection insurance on their website. The detail of their insurance plan is extensive and they do a good job of outlining benefits and processes for clients or potential consumers. The income protection that they offer seems to be limited to 75% of annual income after all ACC and if your benefits from ACC are 80% of your annual income then the income protection policy offered by Westpac, does not pay out. They did not offer a calculator for premium estimations. The policies that Westpac writes are underwritten by Westpac Bank NZ Limited.

Sovereign: Income Protection Insurance: is an online site that seems to focus more of its policy offerings to businesses and not specifically to individuals. The site is full of details about their policies as well as the requirements needed for businesses to start services. Policies appear to pay 75% of annual income if a debilitating event should occur. The website lists several disclaimers which are typical within the industry such as not all occupations are accepted. They also list several perks which are not always seen in income protection policy coverage such as their occupation clause which stated that employees could name their occupation and if they were unable to work in that occupation they would be eligible for benefits. Overall, a lot of information that may need to be scrutinized by consumers as not all statements on the site were properly defined. The Sovereign site was comprehensive and full of tools that would be applicable for existing customers.  Tabs such as “Leaving Your Employer” are important and I had the feeling they do care about their customers.

In closing this article, I would like to remind consumers who are shopping for income protection that while income protection insurance is important, it is equally important to read the fine print and beware of industry pitfalls such as policies that offer benefits for periods of time less then five years. A more comprehensive list of pitfalls will follow in a separate article – click here


(This article and all articles on this site are not to be taken as professional insurance advice and information may not be accurate, for insurance advice please speak to a registered insurance broker. We can connect you with a broker by using the form on this site.)

How Long is the Cover Period?

The benefit period for income protection is dependent upon the type of policy that is purchased. Sometimes the benefit period may be as little as two years in length. Other policies may offer benefit coverage until the policy holder turns 65 years of age.  For most consumers the longer the benefit period lasts the better.

In fact, the benefit period is on one of the many pitfalls that consumers may not be aware of as they shop for income protection insurance. As we talk about the benefit period, keep in mind that each policy may contain several different benefit periods for different cases that may occur.

Income protection insurance is a policy that is purchased to help protect or insure the policy holders income if they should become disabled or so sick that they can not work. This is also one of the most misunderstood of all the insurance policies that are offered to the public. The confusion comes mostly from determining how the policy will be paid out. There are different methods of ascertaining annual income. There are different reasons why policies can be canceled. There are different payouts for different forms of disability.  There are even different policy types that have their own rules of enforcement and payment. In short, income protection is complex. It gets worse if you throw in to the mix the government and taxation.

Benefit period

Of all the pitfalls that are out there and that involve income protection insurance I think the largest is the benefit period.  If we go back to the concept of income protection insurance, and realize that income protection insurance is designed to protect our income throughout our working life time, then the idea of the benefit period should become clear. Our working lifetime is from the time we start work until we retire at age 65.  There is only one reason why anyone would ever take an income protection policy out for less then the length of our working lifetime.  That one reason is if we are 60 years old and the policy covers us for five years, because, in five years, we are at a retirement age.  That is the only logical reason why any consumer should think about taking out an income protection plan that does not cover their working lifetime.

To paint this picture assume that at age 19 you make $20,000 per year for the rest of your working life. That is 46 years and $920,000. At $20,000 per year, why would you want a policy that only covered you for two years?  That amounts to 55-75% of your annual income which is $11,000 – $15,000 per year (55%-75% of annual income) for two years equals $22,000 – $30,000.  Compare those numbers to your life long income of $920,000.  If you had a piece of art that was valued at $920,000 would you insure it for $30,000?  Probably not. This is why benefit period is important. It is also why buying income protection is necessary.

The reasons why income protection insurance policies that have a benefit period of less then your working lifetime are not worth the investment is because the payments will stop when the benefit period expires. It does not matter if you have recovered or if you are still disabled or even partially disabled when the benefit period ends so does your income protection and monthly checks.

There are companies out there that offer income protection insurance policies that expire when you turn 65 years of age. Those are the policies that most people consider. Consumers who look at their long term financial risks and opt to purchase an income protection policy often first sit down with a financial consultant and work out the numbers.  What you are looking for is the financial stability that will allow you to keep your lifestyle, pay your mortgage, and live a little. To understand fully what that is going to take requires guidance.

The issue of taxation came up briefly, and that is a real concern to anyone who receives a payout from income protection policies. Taxation is a gray area, to say the least, and whether or not payment from an income protection policy is considered taxable income is something that only a tax expert can help you with. The reason is that the types of policies that are available pay very differently.  Some payments will be taxed, and others might not be taxed.  The laws that govern this change frequently and the answers to these questions may change every couple of years.



(This article and all articles on this site are not to be taken as professional insurance advice and information may not be accurate, for insurance advice please speak to a registered insurance broker. We can connect you with a broker by using the form on this site.)

AMP’s Income Security Policies

AMP offers three income protection policies. They are called the advanced plan, standard plan, or the basic plan. The advanced plan and the standard plan are offered in either a stepped premium or a level premium.  The policy type may be either an agreed value policy or an indemnity policy.  Of the two policy types, the indemnity policy is usually cheaper.


One of the welcoming features of the policy choices with AMP is that some plans have benefit periods up to age 65. This is important because the premiums can be set up to be level or stepped.  Level premiums remain the same each month for the life of the policy. Stepped premiums start out low and rise as you age.  This means that consumers who choose a policy with a benefit period to age 65 can have income protection coverage until they reach retirement age. This makes it easy to plan for your financial security.

AMP offers a guaranteed future insurability option which allows the level of protection to be raised if your salary rises over a 12 month period. Income protection payments are based on a percentage of your annual income.  If a policy was started when you were 19, it is likely, that by age of 25, your salary would be significantly higher.  The benefit of having the option to raise your coverage is purely to the consumers advantage.  As we age, we tend to earn more and own more. Having the ability to raise your income protection coverage just makes sense. Especially considering that income protection’s purpose is to provide a financial back up income if we become too sick or are disabled and can not work.  The amount of payments received is directly related to the amount of income when the policy was started. If our income rises so  our income protection benefits should change.  This is not an automatic action and raising the level of your income protection insurance is something that consumers have to assess on an annual basis.

Partial Disability Clause:  AMP offers a partial disability clause in their income protection policies. Consumers who have been out of work due to a disability or illness and then return to work but are not able to work full time or are earning less then when they became disabled can receive a partial payment under the partial disability clause. However sometimes policies can be very restrictive when it comes to partial disabilities.

Some of the nicer features that are build into the AMP policies are the rehabilitation cost and the rehabilitation bonus. Both features are really a bonus to consumers who purchase an AMP policy. The rehabilitation costs feature helps to pay for rehabilitation equipment such as wheelchairs, and rehabilitation program fees. The rehabilitation bonus helps consumers when they enter an approved program for rehabilitation. Both help the consumer by providing funding that can help speed recovery time.

Another positive feature of the AMP policies is that they automatically increase cover to match inflation costs. Increases are matched to the CPI or consumer price index. The advanced policies include inflation costs while a claim is active. For consumers who have active claims, this benefit really adds up. Keep in mind that policy payout is a percentage of your annual income at the time the policy was taken out. That percentage range is 55%-75% of your annual income. In a year, when inflation could hit 3% for cost of goods, a policy that adds in cost of inflation is really making a financial contribution to your life.

As consumers consider the importance of income protection insurance plans, and the downsides of insurance protection policies, it is my hope that the positive attributes of the AMP plans can add peace of mind for many consumers. There really is a vast difference that is offered by AMP insurance protection plans when compared to many other companies and their plans. It is still important that consumers take the responsibility to know what they need financially. To help figure out the financial impact of suddenly becoming disabled, it is a good idea for consumers to sit down and talk with both a financial adviser and a tax professional.  Some income protection plans are taxed as income, and it is better to know this ahead of time then to find out in the middle of a disability.

In closing, remember the benefits that AMP income protection policies have and items like the rehabilitation bonus and automatic inflation adjustment. These kinds of benefits really add value to a policy.


(This article and all articles on this site are not to be taken as professional insurance advice and information may not be accurate, for insurance advice please speak to a registered insurance broker. We can connect you with a broker by using the form on this site.)