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.
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 pr
It begins when you become:
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.
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.
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.
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 coverwhile you are fit and healthy – to provide for your loved ones when you aren’t able to financially or emotionally support them any longe
Mortgage Protection/Repayment Insurance
Mortgage Repayment Insurance can be set up on its own, or in conjunction with other insurance cover likeincome protection insurance or trauma insurance. Your insurance specialist will help you to work out the best combination of cover for you.
Mortgage Repayment Insurance is designed to provide funds to meet your monthly mortgage payments should you be unable to work for a period of time due to illness or injury. An attractive feature of this product is that any other income you may receive while on claim (such as ACC) is not offset against your monthly benefit payable by the Insurer.
In most other respects it acts like income protection insurance cover.
You choose a wait period (generally 4, 8, 13 weeks), which is basically a period of time that you need to cover the mortgage payments yourself if you are unable to work due to illness or injury, before the insurance starts paying.
The insurance then pays a pre-determined (agreed value) amount of money each month, until you are better or until your benefit period expires. Your benefit period is the period that you choose – either 2 years, 5 years or until age 65.
Each different insurance cover will establish the maximum cover, but as a guide you can generally insure up to 110% of your mortgage payment. Some insurers have a maximum monthly amount that you are able to cover while other’s will simply insure your total payment.
This product can be great for a couple where if one person is unable to work then the joint mortgage payment is covered and you can generally cover the day to day living costs from the other person’s income who is still working.
For a single person or an individual (in a joint relationship) who earns the majority of the household income we would recommend that some form of Income protection policy is also taken out. After all is may not be very useful having your mortgage payments made if you are unable to pay other costs for Food, power, telephone etc..
It is important that you get advice on how to combine this insurance with other insurances to make sure that you get the right combination of cover.
How much Mortgage Repayment Insurance cover do I need?
- How much is your mortgage debt?
- How long can you afford to wait until the benefit starts paying you?
- What other insurance cover you have or are putting in place
How do we help you with your Mortgage Repayment Insurance?
After talking with you, we research all the options available to you, to find the mortgage repayment insurance that is most suitable for you. This takes into account your criteria, whether that is best quality cover, or best cost cover for your needs.We then assist you to get that insurance cover in place with the least possible hassle to you.
After the insurance is in place, we will keep in touch with you, to answer any queries that you have about your insurance cover. If you have a claim, we are here to assist you with that process, to reduce the stress on you.
What do I need to be aware of with my Mortgage Repayment Insurance?
Your mortgage protection insurance policy will only pay out when you suffer a medical issue if:
- Your premiums are paid and up to date.
- You have disclosed everything relevant at the time that you apply for the mortgage protection insurance cover.
Any pre-existing conditions that you have will be excluded from cover.
Case Study – Mortgage Repayment Insurance
Jason decided to put in place a combination of Mortgage Repayment Insurance cover and Income protection insurance cover. When he was diagnosed with a TIA (transient ischemic attack – or simply a little stroke), he found that he couldn’t work for some time. He continued getting TIA’s and had to stop work as an architect.
After his wait period of 4 weeks, Jason’s mortgage repayment insurance of $3,000 a month fully covered his mortgage payments. In addition to this his income protection insurance paid a benefit of $6,000 a month. This enabled him to recover from his illness and be financially stable until he was ready to go back to work. The insurance policies worked together as he started back at work, by providing him with partial disability and recovery benefits.