Do you really need income protection insurance?
Income protection insurance is a special type of insurance where you receive a regular income if you get injured in an accident or come down with a severe illness. You will continue to receive income from the insurance company until you’re well enough to go back to work or you officially retire at age 65 or older.
The amount of income you receive will not match the exact earnings you had at your job. In most cases, the insurance company will pay you around 75% of what you were earning before. Not only that, but you’ll get to keep your current work benefits because those premiums will be taken care of.
Income protection insurance is totally optional. The decision to purchase an income protection insurance policy should be based on the nature of your current employment and your current financial status. For instance, if you work a dangerous or physically demanding job and you have a high risk of getting injured, then income protection insurance may be a good investment.
Some employers offer income protection insurance to their employees, but not all of them do. If your employer does not offer this insurance and you’re afraid of getting hurt on the job, then you should think about getting it. Just be prepared to pay high monthly premiums because this type of insurance is not cheap. That is why a lot of people choose not to get income protection insurance coverage.
The cost of income protection insurance is influenced by your age, health history, current health status, selected coverage amount, the types of injuries & illnesses you want to be covered, the nature of your job, and the amount of time it takes to receive your insurance-based income. Obviously, these factors will be different for everybody, so your premium costs will vary.
In New Zealand, tens of thousands of working people end up injured or sick and become unable to work. If you have a lot of money in the bank and no family to support, then you could probably survive on your own in this situation. But if you’re a working-class person with very little savings and a family to worry about, then you cannot afford to go without income for weeks or months. Income protection insurance could be the only solution for maintaining financial stability in your household.
In New Zealand, the government operates a universal insurance coverage scheme which covers people who get injured in an accident that they could not prevent. The Accident Compensation Corporation, otherwise known as ACC, will pay you 80% of your income if you’re unable to work because of the accident. However, it does not cover long-term illnesses or sicknesses that might prevent you from working. For this reason, it might be a good idea to get income protection insurance anyway. Whatever the ACC does not cover, your income protection insurance will.
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