Have You Protected Your Biggest Asset? And No, it’s Not Your Home.

What is worth millions, yet 80% of Kiwis haven’t insured? Your ability to create income.

Imagine, you went to work today, and something happened. Maybe you got into an accident which permanently affected your ability to earn income. Or something didn’t feel right, so you popped in to see your doctor, only to be diagnosed with a catastrophic illness. This could mean anything from a short period of time off work for treatment, to something that side-lines you more permanently.

While it’s pretty tough to think about, 300 New Zealand households face this situation every week. This places them in an incredibly vulnerable position. Heart attacks, cancer, or the diagnosis of a long-term illness like multiple sclerosis turn their lives, and income, upside-down. 49.06% of Kiwi men will get a cancer diagnosis during their lifetime. For women, its estimated that 33.28% will get cancer.  Unfortunately, it’s a common experience.

Your biggest asset is you, and the future income you will provide. You are the source of the income that keeps the rent or mortgage paid, the kids clothed and fed, and the power on. In your working lifetime, you’ll likely make between $1 and $2 million dollars. Have you insured yourself and the income that you bring?

But this is why I have sick leave

Most Kiwi employers give you between five and ten sick days a year. Even if they allow you to accrue it, for most people, sick leave only amounts to cover a few days of a cold or migraine, and a couple of days off to care for sick kids. Sick leave is designed for short term illnesses and even then, it’s often not enough.

Even if your employer then pays out all your annual leave, both owed and accrued, that’s only maybe a month of income covered altogether.

But ACC will cover me, won’t it?

Maybe. ACC is designed to cover accidents that result in harm to you, and the associated losses. It doesn’t cover illnesses like cancer, unless they are explicitly linked to a workplace (like asbestos exposure). And even then, if you are injured, it only pays 80% of your salary.

The government has sickness benefits though

Yes, they do. But if your partner is working or you have a certain amount of money in the bank or other forms of assets, then WINZ might not cover you at all. And even if you are fully covered, the maximum payment could be as little as a few hundred a week. Is that enough to keep the wolf from the door?

So what happens if I can’t work?

If you’re not making money, how do you survive?

Only 57% of Kiwis have life insurance. It’s estimated only 20% have income protection insurance. These forms of insurance should be vital, a lifeline for those with short term, long term, or terminal illnesses. Because if something terrible happens, the last thing you need is extra stress associated with how you support your family.

Not only is there a loss of income while you can’t work, but there’s also an increase in medical bills and equipment. Or, perhaps the other income earner needs to take time off to care for you too, worst case scenario.

You could easily lose your home, your independence, and seriously set back your plans. In a perfect world, you’d have three insurance types:

• Life and trauma insurance, for a bulk payout in case of permanent trauma and death
• Health insurance, to pay for treatments not covered by the public health care system and to speed your path through the medical processes. Currently in NZ, there are around 280,000 people waiting on elective surgery who don’t qualify to go on public waiting lists.
• Income protection insurance that covers a percentage of your income for a period of time, depending on your policy.

These three insurance types are complementary. While they work together, there is no overlap.

But income protection and life insurance are expensive

They are expensive because current health insurance claims alone are made each year to the tune of more than $1 billion. These forms of insurance are expensive because they are used a lot, and the rate of claims is expensive. They are saving lives and lifestyles.

Imagine you were offered a job. There were two choices of salary.

The first option, the salary was $100,000, but the minute you stopped working, the income stopped.

Or

The second option, the salary was $90,000, but if you got sick or could no longer work, the income would continue – possibly up to age 65 depending on the policy.

Which would you choose? The lifetime of income, or the full salary that stops as soon as you do? While insurance is expensive, the cost of not having it is far greater. The best time to get your insurance sorted is when you’re fit, healthy, and think everything is fine. If you do develop a medical condition, even a benign condition like high blood pressure, you may face exclusions and higher premiums.

Talk to a financial planner

The single best thing you can do is talk to a financial planner. Unlike an insurance broker, they’ll take a holistic approach. They’ll look at your income, your outgoings, and at your overall exposure. There are so many options for insurance too, with health insurance, life insurance as well as income protection insurance. Every policy is different, and they may not all work for you and your situation. Around 25% of income protection claims are rejected as the conditions are not covered by the policy.

A financial planner knows the ins and outs and can help you make the best decisions for your specific circumstances. For instance, trauma insurance combined with income protection insurance can be cheaper than two products on their own, so it’s finding the combination that works for you.

An ounce of protection is better than a pound of cure. Protecting your biggest asset is an essential part of financial planning and one you will never regret. Contact Sam Kodi today to make sure you and your family are protected.