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Most New Zealand home owners would consider it foolish to NOT insure their home. Major damage to a house due to flood or fire could result in substantial costs that could be financially disastrous!

But do you realise that your home is NOT your most valuable asset?

The asset worth far more than your home, your car and contents, and possibly even your business too is YOU!

If you lose the ability to go to work and earn your income, then you put at risk the ability to provide you and your family with the food, clothing, and shelter essential to survive, and to meet the ongoing expenses of mortgages, education, and other lifestyle expenses and luxuries.

What about ACC?

Many think if they can’t work that ACC will ‘fill the gap’. ACC pays up to 80% of your income once you have been off work for more than a week, but only if you are injured, and 7 out of every 8 disabilities in New Zealand are caused by illness and have no ACC cover.

Almost one-third of all private Income Protection Insurance claims are due to injuries where ACC either has NOT provided cover, or are paying a lower income than the claimant is entitled to with the private insurer, or because ACC has stopped making payments because the claimant is unlikely to ever return to any work.

But what about the Sickness Benefit?

WINZ can provide a sickness benefit if an illness prevents you from working, but this pays the same as the unemployment benefit – not very much! It can also be offset if there is other income coming into your family, for example – a working spouse/partner.

What’s Better than ACC or WINZ?

Private Income Protection Insurance can pay up to 75% of your before tax income if you are unable to work in your usual occupation due to ANY illness or injury. Payments start after a waiting period that you choose – usually 4, 8 or 13 weeks – the longer the waiting period, the lower the cost. Payments can continue right through to age 65 or 70, or your earlier return to work.

If your disablement means you can’t work in the job you were doing when you became disabled, then you cannot be forced to return to some other work (which can happen with ACC or WINZ).

But what does this Insurance cost?

The cost is dependent on a number of factors – your age, your sex, your state of health at time of application, your smoking status, and your occupational duties. A waiting period of 13 weeks is typically half the price of a 4 week wait, but if you are off work for 12 weeks you would receive no payment with a 13 week waiting period.

Typically the cost is between 1% - 3% of your gross income, and in some instances, the premium may be tax deductable.

For the self employed you may find that a private Income Protection Insurance policy combined with ACC Cover Plus Extra, may be less expensive but provide far greater cover than the normal ACC Cover Plus benefit. Remember, Income Protection cover illness and injury, and will top-up any shortfall in your income from ACC benefits.

Getting into this sort of detail does become a little complex and will require a knowledgeable financial adviser who specialises in Income Protection for the self employed.