Why Income Protection Matters

Wealth protection, not just wealth creation

What’s your most valuable asset? If you put aside intangibles like family, happiness, and health, most people will list high-value items such as their home. But, if you have a mortgage, the bank technically owns most of your home. And for most people, their income over a lifetime will be three or four times the value of an average property.

It’s time to start thinking about your income as an asset – something valuable that you need to look after. You wouldn’t take the risk of owning a home, driving a car, or even travelling overseas without insurance, so why risk your income? After all, without it, the home, car, and holiday are almost impossible.

Insuring your income

Income protection insurance means that you won’t lose your greatest asset, even if the worst happens. Unlike life insurance, which only pays out once you die, income protection covers you for injury or illness so you can maintain your lifestyle if you’re not able to work.

Not being able to work has a huge impact – not just financially, but emotionally and psychologically as well. With income protection, you can use your time off to recover, without the financial stress of spending savings, borrowing money, or even having to downsize your house and sell off your assets.

Mistakes and misconceptions

Most of us focus on wealth creation throughout our lives, but wealth protection is equally important. It would be tragic to lose the assets earned through a lifetime of hard work because of an unexpected event – particularly if that loss could have been prevented.

We generally start to worry about disease and disability as we age, but younger people can be hit harder by loss of income – they don’t tend to have the savings older people have.

ACC is also misunderstood – people assume that it will cover them for loss of income. But this will only happen if you’re injured in an accident, and ACC won’t necessarily cover your income at its current level.

Getting it right

Protecting your income is one of the most important financial decisions you can make. But insurance isn’t simple. Income protection is particularly complex, with a range of options depending on your job, income level, and assets. Some types are designed for self-employed earners, some for wage or salary earners. If you work in certain industries, you may also need redundancy insurance in case you’re laid off.

To make sure you’re making the right choices, talk to a financial advisor – they’ll be able to talk you through your options, and set you up with the right combination of insurances for you and your family. That way, you’re covered, even if the worst happens.

Phil Robinson

Income Protection & ACC Specialist