Income or Mortgage Protection

Provides a replacement income whilst you’re off work due to disability.

If you develop an illness or disability that results in you not being able to work for an extended time then you should take steps to ensure that you can still pay your mortgage, bills and household expenses.

Any such event can have a devastating effect on your finances – one from which you may never recover; especially, as so often happens, if your illness leads on to a more serious disability.

Income or Mortgage Protection plans tend to be the most expensive of all the cover types; due mainly to the high possibility of a claim, but also because of the potential amounts which could be paid
– a forty year old insuring himself for $60,000 per year for example, could receive over $1.5 million if an illness lasted to age 65.

But Doesn’t ACC Cover Me?

Although ACC provides a fairly good basic cover, it does have its limitations. The most important of these is that ACC will only pay claims relating to accident or injury – not illness – and given that only about 20% of all long term claims (i.e. more than 3 months) are accident related, having ACC still leaves the most significant part of the financial risk with you.

Types of Plans

In general there are three different products which can be used:

• Mortgage Protection

  This has a maximum benefit equivalent to your monthly mortgage. Premiums are not tax deductible, but benefits are not taxed at claim time, and they are not subject to a reduction if you also receive benefits from ACC.

• Indemnity Income Protection

  Insures up to a maximum of 75% of your gross earnings. At the time of claim it is necessary to financially prove to the insurer, that your pre-disability earnings (usually over the previous 3 years) have been sufficient to justify paying out the benefit level insured. The current understanding of the tax position is that the premiums are tax deductible and the benefit is tax assessable. The benefit will be reduced by any ACC benefit received.

• Agreed Value Income Protection

  Insures from 55% up to a maximum of 75% of your gross earnings. The benefit level has been pre-agreed by the insurer, meaning at the time of claim it is not necessary to financially prove that your pre-disability earnings have been sufficient to justify paying out the benefit level insured. The benefit level is agreed regardless. The current understanding of the tax position is that the premiums are not tax deductible and the benefit is not tax assessable. The benefit will be reduced by any ACC benefit received.
  The Amount of Cover
  Your monthly benefit can be up to a maximum of 75% of your taxable income, although many people elect for a sum which covers the essentials such as mortgage, bills & food.

• The Waiting Period From Start Of Illness To First Payment

  This can be 4, 8, 13, 26, 52, or 104 weeks. The lower the wait period, the sooner the benefit is paid out and the higher the premium paid. Making a decision on the wait period will depend on how long you can go without pay and will also depend on affordability. An emergency fund saved will enable a longer wait period to be chosen, saving money on premiums.

• The Time That You’d Like To Receive Benefits For

  You usually have a choice of 2 years, 5 years, or all the way to age 65 or 70. Many people select age 65 as this coincides with the normal retirement age, but the shorter options are useful if your budget’s tight.

The plan details will vary from insurance company, please refer to the policy wording of the cover.

What are Stepped Premiums and Level Premiums?

	Stepped Premiums Increase annually as you get older, but usually start cheaper. To cover short or medium term needs.
	Level Premiums Don't increase as you get older but usually start higher. To cover long term needs.

The plan details will vary from insurance company, please refer to the policy wording of the cover.