What is Income Protection Cover?
Your ability to earn an income is probably your most important asset, and unexpected time away from work could be financially devastating for you or your family.
If you’re unable to work due to a disability or extended illness, a little protection can go a long way to making sure the last thing you have to worry about is money.
Income Protection cover gives you up to 75% of your pre-disability earnings to cover your living and lifestyle costs while you’re off work. It includes a range of recovery and rehabilitation benefits to help you, and your family, get back on your feet faster.
How long could you survive without your income?
The median weekly income from paid employment in New Zealand is $9591. What would happen if you were unable to work?
Each year 54,800 Kiwis have a member of their household who can’t work for three months or more due to illness2. And 47% of working Kiwis aged between 18 and 64 could not survive longer than one month after using their sick and annual leave2.
Unfortunately, Government benefits are unlikely to cover your living and lifestyle expenses. You can only claim from ACC if you suffer an accident, and if your injury is degenerative they will not accept your claim. Additionally, Work & Income’s Jobseeker Support for a single person is just $212 per week, or $189 per week if you are married with children3.
Why Fidelity Life Income Protection?
There are nine great reasons to consider Fidelity Life Income Protection.
Unique income offset
Some people – especially if you’re self-employed – find it hard to fully step away from work, even if they are totally disabled. Fidelity Life is the only provider to allow you to keep working up to 10 hours per week, if you need to, without affecting your monthly benefit payment. This allows you to focus on recovery and returning to work faster.
This means you continue to receive your monthly benefit (less any benefits received from ACC or other insurance company) as well as your income from working. If you are able to return to work for more than 10 hours per week and are earning less than 25% of your pre-disability income, we will consider there to be nil earned income when calculating a partial disability entitlement.
Unique quarterly claim payments increases
Fidelity Life is the only provider to offer a Claims Escalation Option which ensures your monthly benefit continues to keep up with inflation by linking it to the Consumer Price Index every quarter, rather than annually. This means that claims lasting less than a full year can still be protected against rising inflation costs (in return for an additional premium).
Unique support beyond retirement
Sometimes your disability will last beyond retirement. While you no longer face the risk of not being able to work, this can result in additional unforeseen costs, such as nursing care or home help, which typically need to be funded out of retirement savings. While some support can be provided by the Government, this is not guaranteed.
To protect you against this risk, we offer an Extended Benefit Option (in return for an additional premium). This ensures that, if you are on claim for at least three months prior to age 65 and your disability leaves you unable to undertake two or more activities of daily living without assistance (for example dressing, bathing or eating), we will continue to pay your claim until you recover or die.
Comprehensive and flexible
Fidelity Life’s comprehensive Income Protection product provides a range of built-in and optional benefits which provide the flexibility to tailor your policy. Whatever your needs and budget - whether you simply want to cover your income, or consider more comprehensive covers such as continuing your benefit beyond retirement – we’ve got you covered.
Fixed premium certainty
With Fidelity Life’s level term premium option, you can be certain your premium is actually level – your premium won’t increase as your age increases, even when indexation has been selected. This is ideal if you are on a fixed budget4.
Business continuity for the self-employed
We provide you with the flexibility to direct your monthly benefit towards employing someone to continue running your business and minimise the impact of you being unable to work.
Support for unexpected complications during pregnancy
We understand that not every pregnancy is the same and some women are unable to work due to unexpected complications. If you are hospitalised with unexpected complications, such as Hyperemesis gravidarum, then we may consider a claim.
Benefit certainty for indemnity cover claims
For an indemnity cover claim, if you provided financial evidence at the start of your policy in support of your monthly benefit, then the first six months of your claim will be assessed as agreed value.
This means that at the time of claim, you do not have to worry about providing us with financial evidence when you are dealing with a disability.
This also benefits you if you’ve had a drop in income and have not reduced your benefit to match, because Fidelity Life will pay the higher amount for the first six months of your claim.
Personalised claims support
Income protection claims can last for months or even years. We’re there to help our customers, and in 2017 we paid out more than $23.2 million in income protection claims.
Our expert claims team provides you with the support you need when recovering from a disability or extended illness. We don’t believe that one size fits all so, like our comprehensive and flexible policies, our support is tailored for you, and focused on helping you get back to work faster.
- Entry age is from age 16 to 59. (Age 55 for ‘to age 70’ benefit.)
- Cover ends at age 65, unless the benefit period is to age 70.
Level of cover
- The maximum monthly benefit is $30,000, subject to financial and medical assessment.
Two types of premiums available
- Yearly renewable premiums are fixed for one year at a time and will normally increase in line with age.
- Level term premiums are fixed for period selected4.
Two Variations of Cover
Cover is assessed at the time of claim. Up to 75% of your gross annual income can be insured if you select this benefit.
|Income Amount||Percentage Applied|
|$320,000 or less||75%|
|$320,001 to $440,000 (inclusive)||50%|
|$440,001 or more||20% of any additional income|
- If you are disabled we will pay the monthly benefit less other income until the period of disablement ends, the benefit period expires, you reach age 65 (unless the benefit period is to age 70), or you die. We do not pay a monthly benefit during the waiting period.
- For the first six months (less the waiting period) of any claim, the benefit will be based on the specified monthly benefit less other income.
- After six months, the amount of the benefit will be the lesser of the specified monthly benefit or 75% of your pre-disability earnings less other income at the time of the claim.
- The monthly benefit applied for must be substantiated at either application time or claim time.
Cover is assessed at the time of application. Up to 62.5% of your total gross annual income (averaged over the last three years for self-employed persons), can be insured if you select this benefit.
|Income Amount||Percentage Applied|
|$70,000 or less||62.5%|
|$70,001 to $100,000 (inclusive)||60%|
|$100,001 to $320,000 (inclusive)||55%|
|$320,001 to $440,000 (inclusive)||35%|
|$440,001 or more||20% of any additional income|
- We will pay the monthly benefit less other income until the period of disablement ends, the benefit period expires, when you reach age 65 (unless the benefit period is to age 70), or you die.
- We do not pay a monthly benefit during the waiting period.
- Proof of income must be provided at application time
A customer earning $120,000 per annum could expect to be insured for a monthly benefit of $6,063. This is calculated as follows:
|$70,000 x 62.5% =||$43,750|
|+ $30,000 x 60% =||$18,000|
|+ $20,000 x 55% =||$11,000|
|Total Insured Benefit ($72,750/12) =||$6,063|
All these great features are included in the standard cover.
Benefit payment period
The available benefit periods (i.e. how long you will receive a benefit) are: 2 years, 5 years, to age 65 or to age 70.
You can select the period for which you are prepared to self-insure. We offer seven waiting periods: 2 weeks, 4 weeks, 8 weeks, 13 weeks, 26 weeks, 52 weeks or 104 weeks. The waiting period will start from the date you receive medical advice from a medical practitioner that you are unable to work or need to reduce your working hours due to sickness or injury.
Payments in advance for total disability benefit
We pay the monthly benefit fully in advance if you are unable to work due to illness or injury for more than ten hours a week.
Partial disability benefit
If you work with a reduction in earnings as a result of sickness or injury, a partial benefit may be payable.
Family member support benefit
If you are confined to bed, and require full-time-care, this benefit provides financial support for an immediate family member who provides care and whose own income ceases as a result.
Hospitalisation/nursing care benefit
This provides additional financial support for bed care during the waiting period for up to 90 days.
This is payable in addition to the monthly benefit, if you undertake an approved rehabilitation programme for the purpose of retraining or re-education.
Recovery support benefit
This is payable in addition to the monthly benefit, to assist in recovery and rehabilitation costs such as buying a wheelchair, prosthetic devices, and house and car modifications.
Recurring claim benefit
The waiting period is waived on claims which result from a relapse or recurrence of the same or related illnesses within 12 months of returning to work.
Benefit period reset
If we have paid you a claim and you suffer from the same or a related injury or sickness after returning to full time paid work for at least 12 continuous months and you become disabled or partially disabled, the benefit period and waiting period will start again.
Waiver of waiting period
The waiting period of a new unrelated claim is waived in certain circumstances.
Benefits can still be paid even though you are unemployed, though the definition of disability changes.
This may cover the cost of economy airfare back to New Zealand if disabled whilst overseas (maximum $5,000).
This may allow you to increase the monthly benefit by up to 10% without further medical evidence.
If you are self-employed at claim time you may be able to choose to employ a replacement and claim the cost of that person rather than receive the disability or partial disability benefit.
Leave Without Pay
If you take unpaid leave from your job or you are made redundant, you can put your income protection cover on hold for up to 12 months and not pay premiums. While on hold, you can’t claim any benefit.
These options can be added to your base cover for an additional premium, to give extra support where you need.
Waiver of Premium Cover
While a disability or partial disability benefit claim is being paid for an insured person with the waiver of premium cover, the premiums due on the policy after the waiting period ends will be waived and premiums due and paid during the wait period will be refunded.
Extra benefits option
- Death benefit – A lump sum of three times the monthly benefit is payable if you die while on claim.
- Total and Permanent Disability benefit – Provides a benefit of 24 times the monthly benefit where the insured person has been paid a monthly benefit for 12 consecutive months and where the insured person is totally and permanently disabled.
- Specific injury benefit (see table) – A benefit for listed specific injuries, payable whether you are working or not, with no offsets.
- Specified medical condition benefit – If you suffer one of the specified medical conditions below we will pay you the monthly benefit for a minimum period of six months, whether you are working or not.
|angioplasty (triple vessel)*||heart valve surgery*|
|aorta surgery*||major organ transplant|
|cancer*||myocardial infarction (heart attack)*|
|cerebrovascular accident (stroke)*||multiple sclerosis|
|chronic renal (kidney) failure||paralysis|
|coronary artery bypass surgery*||severe burns|
*Cover for these conditions does not start until three months after the policy commencement date.
Claims escalation option
While on claim, your benefit will be linked to the Consumer Price Index (CPI) and adjusted every quarter.
Extended benefit option
This option allows your benefits to continue if you have been disabled for at least three months prior to your 65th birthday and you are unable to perform two or more activities of daily living.
Booster benefit option
This option increases your disability benefit by one third during the first three months of your claim. Where a partial disability benefit is paid after the waiting period ends, an additional 25% of that amount will be paid for up to a maximum of 12 months.
Retirement protection benefit option
This provides for continued payment of the insured person’s KiwiSaver employee contributions to your KiwiSaver scheme via the IRD (limited to a maximum of 8%).
This option only applies if your premiums are level. It allows the policy to continue with the same level of cover on a YRT basis at expiry of policy term or to take up another level term policy. Conditions apply.
All of the above require payment of an additional premium.
To ensure your benefit keeps pace with inflation, you can choose to have your cover increase each year by the greater of 2% or the Consumer Price Index, regardless of health. Where premiums are level and the indexation option has been selected, the sum assured will be increased by a fixed rate of 2% each year.
Back and mental disorder limitation
If you limit the benefit period for a mental disorder or back claim to two years, you will qualify for a premium reduction of up to 20%.
Specific Injury Benefit
|Specific injury means:||The payment period|
|Paralysis (diplegia, hemiplegia, paraplegia, quadriplegia)||60 months|
|i) Both feet or both hands or sight of both eyes||24 months|
|ii) Any combination of two of: a hand; a foot; sight in one eye||24 months|
|iii) One leg or arm||18 months|
|iv) One foot or one hand or sight in one eye||12 months|
|v) Thumb and index finger of the same hand||6 months|
|i) Leg above the knee (femur), pelvis||90 days|
|ii) Leg below the knee (tibia or fibula)||60 days|
|iii) Ankle, heel||60 days|
|iv) Kneecap||60 days|
|v) Vertebrae||60 days|
|vi) Upper arm, shoulder bone, elbow||60 days|
|vii) Wrist||45 days|
|viii)Forearm, collarbone||30 days|
|ix) Skull, jaw||30 days|
Fracture means any fractures resulting from an accident requiring fixation, immobilisation or plaster cast treatment of the affected area within 48 hours of the accident.
4 Subject to tax and regulatory changes that are out of our control
Disclaimer: This is a convenient summary of the key points of this insurance policy. It is not, and is not intended to be, a policy document. Details of definitions, benefits, standard exclusions/limitations, terms and conditions are contained in the official policy document which is available from your financial adviser. You should read the policy document carefully to make sure you understand exactly what cover is provided under each benefit. This document does not provide a personalised financial advice service.