Heading off trouble with income protection

Most people think of insurance as a necessary evil, until they need to use it. We don’t often consider income protection insurance as necessary, often because we don't know much about it. Perhaps the insurance industry is to blame for the fact that only 11% of Kiwis have this cover.

If we understand the principle that our most important asset is our power to earn an income and that this power can be taken away instantly in the case of an accident or serious illness that stops us from working, the importance of income protection becomes clearer. 

Most people will purchase car and fire insurance, yet our odds of becoming disabled and needing income protection are 5 times as great as needing fire insurance. If the statistics on take-up are anything to go on, most people are convinced that nothing serious will happen to prevent them from earning.

If a person calculates what he or she will earn over their working life, they will probably come up with a figure somewhere around two million dollars. That may seem like an astounding sum, but calculate it for your own situation. If a person averages $50,000 per year over a 40 year working life time, he or she will earn $2,000,000.

With this figure in mind, purchasing an income protection insurance policy to cover the mortgage, food and expenses for a period of time until one recovers begins to make some sense. Considering that policies can be tailored to one’s budget and are tax deductible, there's a strong case to make some enquiries with a good financial adviser.

Most people should look into an income protection insurance policy. It is usually affordable, as it can be tailored to the family budget. It is a vital form of protection that will avert disaster should a disability occur. Unless a person is extremely wealthy, there is usually no other way to guarantee sustained income should disability strike.