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89% of Kiwis not insured for loss of income survey finds

Saturday 16 February 2013, 6:30PM

By Bruce Millner

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According to global insurer AIA, 89% of Kiwis do not have income protection insurance, with only 11% of survey respondents holding cover.

Many people value their possessions much more than anything else, with 87% having car insurance, the survey found. Everyday items are generally insured, but protecting the one thing most people could not live without, their income does not rate highly.

Nationwide insurance advisers NZ Risk, commenting on the survey, said if each and every person with an income, employed or self employed, actually sat down and thought how they'd cope without their salary, they'd soon realise that income protection insurance is essential.

The AIA survey found that 50% of Kiwis hold some sort of life insurance policy. When it comes to protecting the family, many probably think that it is their most important cover. Yet life insurance only pays out when someone dies or is diagnosed with a terminal illness. Aside from certain instances of terminal illnesss, there are no circumstances where a life insurance policy would pay out for a disability or illness which may prevent a person from working. Income protection insurance provides policyholders with a number of benefits, including redundancy and bankruptcy cover, plus personal accident and illness cover.

NZ Risk advises that budgeting for the premium for income protection insurance should be an important part of a person's personal financial planning. No-one wants to be financially crippled through no fault of their own, so it's important to build the premiums into one's budget.

Aside from paying a regular income, one of the main things which makes income protection cover different from other insurance is that in most cases premiums are tax deductible. For business people and self employed people, significant ACC levy savings can also be made if they hold private income protection. Typically the savings are over $1,000 per year according to NZ Risk.

The impact of any disability, whether permanent or even for a few weeks, is bad enough to come to terms with without the added extra stress of worrying about how you're going to cope financially. So, just like one of your prized possessions, you need to insure your income. Then, if the unimaginable does happen and an insurable event occurs, whether it's accident, sickness, disability, redundancy or even bankruptcy, your income protection insurance will make it easier for you to get yourself back onto the road to recovery.