Wright Financial Hamilton - Beerescourt

Disability Income Protection & Mortgage protection Cover insures the beneficiary’s earned income against the risk that an illness or injury creates a barrier for a worker to complete the core functions of their work, based on a GP, medical certificate.

There are generally two structures of Income Protection: “Indemnity” or “Agreed Value”.

Mortgage Protection is agreed value based on your income or your mortgage or rent payments, if your earning capacity is seriously affected by illness or disability ensuring your existing lifestyle is protected. Mortgage Protection Cover has No ACC offsets.

Note, when you take out Income Protection or Mortgage Protection insurance, your insurer relies on information you provide to calculate your premiums and the terms of your cover. You have a duty to disclose material facts that would influence the judgement of a prudent insurer. Material facts may relate to your age, occupation, your medical history, and whether you smoke/Vap or non-smoker.

Agreed Value

Agreed Value means that the monthly sum insured is ‘agreed upon’ from the outset. This means that you don’t have to prove your income at the time of your claim. Your claim amount will remain the same, regardless of any change in your income. Your benefit calculations for Agreed Value are typically based on a percentage of your Gross Income and the benefit paid is usually tax free. All benefits are paid monthly.

The ‘waiting period’ or stand down timeframe is the time between you becoming unable to work and receiving your first income protection payment. You can generally choose a waiting period of between 14 days and one years, subject to the provider. A shorter waiting period resulting in a higher premium.

Indemnity

Indemnity means that you will need to provide evidence of your income at the time of your claim. Your claim amount will be recalculated based on up to 75% of your pre-disability income or the monthly sum insured, whichever is the lesser. All benefits are paid monthly.

However, under the indemnity structure, you will be required to pay income tax on benefit payments received, subject to the provider.

The ‘waiting period’ or stand down timeframe is the time between you becoming unable to work and receiving your first income protection payment. You can generally choose a waiting period of between 14 days and one years, subject to the provider. A shorter waiting period resulting in a higher premium.

ACC offsets could occur with an accident-related claim that could reduce your Disability Income benefit entitlements as you are unable to receive more than your pre-disability income.

20% of the general population in New Zealand have a disability and musculoskeletal disorders are a relatively common cause, affecting 30% of the working-age population.

The financial consequences of suffering a disability or extended illness could be devastating for you, your family, and/or your lifestyle. Income can exceeds a net worth of 1.8 million for an average income earner, over their lifetime.