Income Replacement Insurance

Half of all adult Kiwis have life insurance. They can imagine the catastrophe if the family breadwinner died. Yet we face a much bigger risk financially than death. That is losing the breadwinner's income through "disability" from illness or accident.

Kiwis are much more likely to be prevented from working through illness. Just look at the people in hospital beds - most are there through illness. Online research by insurer last year found that 87 per cent of us have car insurance, 50 per cent life insurance and only 11 per cent income protection insurance.

A 47-year-old customer who suffered a stroke while playing Pictionary. The man couldn't return to work in his profession as a rock driller for the rest of his life. Thankfully his income protection insurance will support him financially until retirement.

Income protection insurance is quite simple. If you lose your income due to temporary or permanent disability through illness or accident you will be paid up to 75 per cent of your previous salary for the period of cover, which could be two years, five years, or until age 65.

People will often take life insurance cover and reject income protection insurance as "too expensive",  even though it is the more valuable cover. They underplay their chances of having an accident or falling ill.

Other common reasons that people don't take out income protection or related insurances, are that they:

* don't know what it costs

* get confused by analysing too many policies, or

* fear they won't be covered for an illness they've suffered in the past.

The irony is that most people would take out insurance to cover a machine in their business that would produce $1 million worth of net profit over the next 20 years. Yet they don't cover their own income, which is worth roughly the same.