It’s no wonder that we all invest in insurance to protect our homes. We put a lot of time and energy into making our homes comfortable, and we invest a lot of love in making them ours. A home is so much more than the walls that surround it and the furniture that fills it.
Of course, homes are worth a lot too: both in the money we pay for them and usually the money we owe on them! So, it stands to reason that using insurance to protect our important asset – the home – is a priority.
But there is one valuable item in our home that we often overlook when it comes to insurance. In fact, it’s one of the most underinsured items there is nationwide. This item is crucial to our earnings, our family’s happiness, and our future.
The most underinsured item in your home is nearly always you.
For nearly anyone reading this still in paid employment, (i.e., you’re pre-retirement age), your largest asset is usually your ability to earn income. That’s because your financial security – and that of your family – is dependent on one single factor: your income. Take away your income and your ability to pay for all the things you need, and some of the extras that make life more enjoyable, is gone.
Despite this fact, research commissioned by the Financial Services Council showed only twenty percent of New Zealanders have considered the risk of lost income due to illness or serious injury. Australian statistics (which probably also apply on this side of the ditch) from Rice Warner, identified that only a third of the working population had income protection insurance.
In the event of an accident, you'll usually be covered by ACC. However, ACC only covers injuries from accidents, whereas income protection cover ensures you are protected in the event of illness and injury – including injuries from ‘wear and tear’.
Payments by ACC are also capped, which means if you earn a good wage, it’s worth exploring whether you need additional cover.
“The government will look after me if I can’t work”
Think again. Government support in this area is very limited. For example, the maximum standard disability allowance is a paltry $70.04 per week!
Life is not something we can easily put a price on. Perhaps that is why we find it so hard to insure ourselves. It’s also difficult – not to mention unpleasant – to think through the scenarios that could lead to an insurance claim. But unfortunately, life can dish up some nasty experiences, which are only made harder if you have to deal with financial stress at the same time.
No one enjoys thinking about the bad things that might occur in life, and that can prevent some people making provision for such eventualities. However, let’s briefly consider some facts:
• A quarter of the 9,000 people who have strokes every year in New Zealand will be under retirement age
• Approximately three out of 10 cancer deaths occur under the age of 65
• A quarter of strokes occur in people under the age of 65
Of course, these are only a few statistics from a vast list of risks.
Quite simply, anyone who is working and earning an income should have income protection insurance. It doesn’t matter if you’re a young single person, a middle-aged person with a family, self-employed or an employee – income protection insurance is essential to safeguard your most valuable asset.
Income protection insurance is designed to replace up to 75 percent of your gross income over a defined period if you cannot work due to serious illness or injury.
Think of it as a safety net for the unexpected - the unforeseen events that life sometimes throws our way. While you can't always dodge those curveballs, income protection insurance could help you absorb the financial impact and get you on your feet faster.
Remember, the trick to getting the right insurance for your needs is prioritising what’s important to you. Take some time to consider the level of financial support you – and your family – would need if something terrible happened.
Of course, there are plenty of options and loads of jargon to wade through, so you might like to talk to an insurance adviser, such as one of our team, they have the experience and tools to help you determine the appropriate types and levels of cover for your needs.