Do I need income protection cover?

Do I need income protection cover?

Have you ever wondered what would happen if your income dried up for a while due to sickness or injury? You may have insurance for your vehicle, home contents and house. And might also have some health insurance. So why not protect the thing that your lifestyle may depend on most? Your income. A financial adviser can help you find what’s right for you.

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For many of us our income pays for rent/mortgage, electricity, water, petrol, clothes and food. And that’s just the basics. We rely on our wages or salary for other things, like entertainment and travel. But if the money dries up, because you become sick or need to recover from an accident, these expenses don’t go away.  

A survey by the Financial Services Council (FSC) of New Zealand in 2022 found that most employed New Zealanders have less than 6-months worth of expenses saved.

While some people are disciplined savers, tucking away money for ‘a rainy day’, many of us don’t have much of a financial cushion. The same FSC research also showed that 40% of New Zealanders would not be able to access $5,000 (without going into debt) if something unexpected were to happen to them.


Have you considered what your financial back up plan is, in times when your income stops due to sickness or injury? Read on to see how income protection cover could form part of your plan.


What is income protection cover?

Income protection cover is designed to replace part of your income if you’re not able to work for an ongoing period of time, due to sickness or injury. In New Zealand, employers are only obliged to pay 10 days sick leave per year, so a long-lasting illness can quickly exhaust your sick pay. 

If you choose Fidelity Life Income protection cover, up to 75% of your gross annual income can be covered (maximum amounts do apply). Payments start after a defined waiting period, which is chosen by you when you sign up for cover. Fidelity Life offer seven waiting periods – ranging from 2-weeks to 2-years. You'll also decide how long you want payments to continue for, once your claim is accepted.

Both the waiting period and duration of payments affect the cost of your cover. A longer wait period and a shorter payment duration cost less, but this could leave you short on income if a sickness or injury persists. We recommend you talk with a financial adviser about your options, they'll help you develop a plan that’s right for your situation.

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What does income protection insurance cover?

When an income protection cover claim is approved, and the wait period that you selected has passed, you’ll start to receive your payments. The money you receive can be used for anything. It can help to pay your rent or mortgage, supermarket shopping, utility bills, school fees, rates, vehicle expenses and all the other things you need in your life.

With Fidelity Life, income protection cover also comes with these benefits:


  1. Additional family member payment. If your illness or injury means, under medical advice, you are confined to bed and require full time care, we'll pay the Family member support benefit. This is where a payment of up to $3k per month could be made, if one immediate family members income stops, in order to provide care.  


  1. Help while under nursing care. This provides additional financial support for hospitalisation or medically supervised bed care during the waiting period for up to 90-days.


  1. Rehabilitation and retraining. If you undertake an approved rehabilitation programme, for the purpose of retraining or re-education to help you return to work, you may receive additional financial support on top of the regular monthly payment.


  1. Recovery support. This can be payable in addition to the monthly benefit, to assist in recovery and rehabilitation costs such as buying a wheelchair, prosthetic devices, or house and car modifications should they be required.


  1. Earlier payment for recurring claims. If you suffered a recurrence of the same or related sickness or injury within 12-months of returning to work, the waiting period will be waived meaning you will receive payment earlier.


For help with choosing income protection cover, talk to an expert.

Making decisions about income protection cover is easier when you get expert advice from a licensed financial advice provider. You can ask questions, consider various solutions and there’s no obligation to buy.

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DISCLAIMER: The information contained in this article is a summary of the key points of the insurance cover mentioned and is general in nature. This article does not constitute a financial advice service. All covers are subject to the definitions, standard exclusions/limitations, terms and conditions contained in the full policy documentation which is available from Fidelity Life or your financial adviser who holds a Distribution Agreement with Fidelity Life. All applications for cover are subject to underwriting criteria.

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