Claiming on your income protection insurance

Your income protection insurance policy is a vital part of your financial strategy. It is important that you review the policy that you have in place to make sure that it is the most suitable for you on the market.

It is also important that you are aware of the features on your policy and that you use these benefits when you are entitled to them.

Particular benefits on your policy that you should be aware of are:

– Hospitalisation, Bed Care or Nursing Benefit
This benefit enables you to claim usually after you have been bed-ridden or hospitalised for three consecutive days. This is regardless of your ‘wait or stand down’ period. This is a benefit that our clients have found to be quite useful, when they are in hospital.

– Worldwide cover
The good quality policies will cover you while you are overseas. Very few companies will actually provide you with income protection insurance cover if you are already booked to travel overseas for an extended period (ie to work), particularly if you are going to the Middle East, or say Papua New Guinea.

However, if you already have a policy in place, and you go to the USA or the UK for several years to work, the cover will continue. But you need to check with your Adviser whether this cover is available to you or not. Some policies will provide you with financial assistance to return home if you are going to claim on your policy for an extended time period.

There are many other benefits on the top quality policies, and the benefits differ greatly between different contracts. Your Adviser knows the details of your particular policy and your Client Service Manager and Adviser are there to help you to claim when it is appropriate.

The disablement process – how does it work?

No one can predict when you will suffer a serious illness or injury, but when you do, more than likely your health may gradually deteriorate before you eventually die.

For some people the process will be very quick – perhaps through a car accident or the sudden onset of a terminal illness. However, for most people, this is a gradual, but inevitable process.

It begins when you become:

  1. Too sick or injured to work.
    If you cannot earn an income, your lifestyle will suffer and you will be forced to make changes. You will probably find it more difficult to meet your living costs when you are disabled than when you could work.

This is the stage that your income protection insurance cover comes into effect. But remember, you will only receive 75% of your pre-disability income AND you will need to pay tax on that income.

  1. Critical Illness and Major Trauma
    Many New Zealanders are disabled by the same medical conditions – heart attacks, strokes and cancer. These conditions will mean time in hospital, time away from your family – and you may wish to have your life partner with you during your stressful diagnosis and treatment times.

What impact will this have on the household income, if your partner has to also take time off work. Trauma insurance provides a cash injection to assist you with juggling your financial issues at this time, and works efficiently in conjunction with your income protection insurance, to eliminate debt, and enable your partner to take leave without pay.

  1. Permanent Disability
    This is the stage, when you can’t go back to work. Your income protection insurance benefit will continue to be paid, but if you haven’t had a payment from your trauma insurance to eliminate your debt, you could still be handling your debt/mortgage, with the lower level of income that you are receiving from your income protection policy. There is a special insurance cover – Total and Permanent Disability insurance that is available for this stage.
  2. Death
    This is the final stage of the disablement process, and is inevitable at some time, but it is not something that anyone likes to dwell upon.Very few people die suddenly, without any warning. This is why it is important to put in place some life insurance cover while you are fit and healthy – to provide for your loved ones when you aren’t able to financially or emotionally support them any longer.

Why you should have income protection insurance – a clients story