Evergreen Life - Income Protection
People insure their house because they can see it and touch it. And yet not many house insurance policies are claimed on. Houses just don't burn down that often. People's earning potential, on the other hand, disappears all the time. Cancer, heart attack and stroke are three of the key killers - not of people, but of their ability to enjoy the life they want.
Steady stream of income
Income protection insurance gives you a steady stream of income if you're unable to work for an extended period of time. And unlike ACC it covers non-accidental reasons for being off work, such as stress, the biggest cause of people needing time off work.
How much to cover?
Income protection doesn't cover your total income; instead there are two options:
- 55% of your income (agreed value) - your premiums are not tax-deductible and you won't have to pay tax on the benefits you receive at claim time.
- 75% of your income (indemnity) - premiums are tax-deductible and you will need to pay tax on the income you receive at claim time.
You can discuss the options with your adviser, and they can advise the best option for your specific circumstances.
Agreed value or indemnity?
The difference between agreed value and indemnity is the amount of certainty at claim time.
To get an agreed value income protection policy, you need to prove your income when you apply (usually an average income over 2 or 3 years - helpful if you're self-employed and your income fluctuates).
With an indemnity policy your income is proved at claim time.