Income Cover
What is Income Cover?
Income cover incorporates both 'Income Protection Cover' and 'Mortgage Repayment Cover'.
It is an essential safety net for anyone earning a regular income in New Zealand. Income cover is designed to pay you a series of ongoing monthly payments in the event that you’re unable to work for a prolonged period of time due to sickness or injury. This ensures that you can continue to meet your financial obligations and maintain your standard of living during difficult times regardless of whether you have a mortgage or not.
Why Income Cover is Important
- Financial Stability: It provides a steady income stream during recovery, helping you manage daily expenses, rent, mortgage payments, personal loans and other financial obligations.
- Peace of Mind: Knowing that your income is protected allows you to focus on recovery without the added stress of financial worries.
- Long-term Security: Income Cover can support you until you’re able to return to work, ensuring long-term financial security for you and your family.
How Income Cover Works
- Claim Process: If you’re ill or injured and can’t work, you can make a claim with required supporting documentation and your insurer will make regular claim payments to you.
- Waiting Period: There’s typically a waiting period before benefits begin, ranging from 4 weeks to 2 years depending on your policy.
- Benefit Payment: Once the waiting period is over, you’ll receive regular benefit payments, replacing a percentage of your lost income for a specified period of time being 2 years to age 65 years.
Income Cover and ACC
Some people rely solely on ACC to provide this type of cover, particularly in a business sense, however ACC is quite limited in the cover it provides. For example, heart attack, cancer stroke as well as conditions as a result of wear and tear, i.e. back injuries are not necessarily covered.
Income protection and mortgage repayment take separate approaches when it comes to ACC. In New Zealand, if you’re unable to work due to injury, then you can expect to receive ACC payments. Generally, income protection policies will “offset” these ACC payments from your claim payments, this means that your claim payments will reduce, or possibly not be made at all if you’re receiving ACC to cover any loss of income.
Mortgage repayment cover approaches this differently, and will typically not offset ACC at all, meaning that you can receive both ACC and your full mortgage repayment lump sum. This amount can be determined by your gross salary and despite its name you do not need to have a mortgage to take it out.
Getting the Right Coverage
Whether on an indemnity value or an agreed value product, the monthly amount insured can be based on your gross salary, mortgage repayments or event rent payments. This is where we come in to help determine the best approach for you.