iStock_000015792531_SmallIncome protection is a critical cover that provides benefits for lost income due to accidental non-work illness or injury. This type of insurance is critical because ACC does not reimburse or provide coverage in the event of cancer or even for a heart attack.

Considering the cost of living, if denied an ACC claim, how will you continue to support your family? People who are not covered by income protection insurance risk losing everything they have worked hard for because they suddenly become disabled, and can not work.

Why Our Income Is Our Greatest Asset

Our income is one of our greatest and most valuable assets that each of us possesses. Consider how much income you make in your working lifetime. If you make on average 40,000 a year over your working lifetime, which is age 18 until retirement at age 65, than you would have made $1,880,000 over 47 years. If you had a sports car that was valued at $1,880,000 would you insure it? Mostly likely you would insure anything you owned that is that valuable. It should be no different with our income. Income is an asset, but we must be able to work in order to earn that asset. If cancer or some other illness or injury prevented your from working, how much of your working lifetime income would you lose? The answer to that question is exactly why protection is important for every working person.

Statistics of Coverage

Currently, only 11% of working New Zealander’s have an income protection policy in place. That means that 89% of working adults in New Zealand are risking a large portion of their income if they should become disabled through a non work related illness or accident.

Consider that 20 years ago we hardly heard the words Alzheimers and yet today almost everyone knows someone who is dealing with Alzheimers. Cancer is also a disease that worldwide is effecting more and more people at a younger age. Cancer is something that older people got, but today, cancer does not discriminate by age. Young people are just as much at risk as are the older generations. An example is found by looking at breast cancer. Breast cancer was the most common form of cancer for women in 2009. Women over 40 years of age have the highest risk factor for developing breast cancer, but breast cancer can affect women of all ages.

Source: http://www.nzbcf.org.nz/component/content/article/9-news/238-breast-cancer-in-new-zealand

If we consider the effects of colo-rectal cancer in New Zealand men, then 44.1 men will be diagnosed with colorectal cancer for each 100,000 men tested for colo-rectal cancer.

Source: http://www.bpac.org.nz/magazine/2012/may/colorectal.asp

This information is not meant to scare people. It is meant to demonstrate the importance of looking ahead and planning for the unknown. That is what income protection does for people. It allows them to plan for the future in such a way as to protect a portion of their income should illness prevent them from working.

Cancer is an important discussion because of what the insurance industry refers to as pre-existing conditions. Since ACC does not pay benefits for cancer, people need to think about how to use income protection insurance to protect their income. Starting a policy when you are younger is one way to overcome the pre-existing condition clause that is used to eliminate cancer coverage from insurance policies. Most policies can be started when a person is 18 years old. Is it likely that an 18 year old will be diagnosed with cancer? No, it is not likely, but starting early protects more of your working lifetime income. It also eliminates pre-existing conditions and allows the policy holder to plan for their financial future. However this is just this writers opinion and we highly recommend speaking with a professional insurance adviser registered with the Financial Markets Authority.

Income protection is a critical type of coverage that more people need to discover and implement. It makes good business sense to protection your income for the unknown.

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