Mortgage Connect provides your connection to insurance advisers who will tailor solutions that meet your requirements and fit your budget.
Mortgage Connect has enjoyed a long and successful relationship with Celtic Insurance Brokers who will provide risk management advice and insurance quotes specific to your own situation. Their aim is to ensure that you will have the money you need if something unforeseen happens.
Usually, a monthly benefit designed to replace your income should you suffer a total or partial disability which leaves you unable to earn your normal income.
Income Protection Cover is a monthly benefit designed to replace your income should you suffer a total or partial disability which leaves you to be unable to earn your normal income.
This type of insurance can also be known as Income Protection Insurance and Disability Income Protection, and other similar insurances which may be recommended in some circumstances include Mortgage Protection Cover which protects mortgage repayments and Key Person Cover or Business Continuity Cover which has been designed for self-employed and business owners.
Ask yourself these questions;
- How long are you able to survive without an income?
- How much of your income could you survive on?
- Would you be able to stay in your house if your income ceases tomorrow?
Most people need a regular income, and if their income ceases it would not take long before financial troubles hit.
It is vital that you get the best policy, and therefore having good advice is crucial. It is for this reason that Mortgage Connect insists that you deal with specialist insurance advisors.
Understanding Your Income Protection Insurance
People earn income in different ways and therefore you will find a range of different Income Protection Insurance policies designed to suit these different situations.
There are three common types of Income Protection Insurance policies which determine how your benefit is calculated;
The most commonly available Income Protection Cover uses the ‘indemnity’ definition which means at the time of applying for the insurance you select your income and therefore the amount of cover you require. It is then up to you at claim time to prove that you were earning the stated income and your claim will be assessed on your loss.
This is the easiest type of policy to apply for, however, it is not necessarily the best Income Protection Insurance cover.
Agreed Value Cover
An ‘agreed value’ definition simply means the insurance company agrees on the amount they will insure you for so that you are only paying for what you are covered for, and more importantly you have certainty at claim time.
Anyone who is self-employed or has income from multiple sources should consider the ‘agreed value’ definition, but there are good reasons that would suggest everyone should opt for a policy that offers certainty at claim time.
Loss of Earnings Cover
The ‘loss of earnings’ definition is often going to be the most appropriate Income Protection Insurance policy as it offers you the choice (at claim time) of how your loss of earnings is determined.
This can make a big difference if there are ongoing income or entitlements (ACC etc) that may be available to you.
In some cases, Mortgage Protection Insurance may be more suitable; however many of these policies provide limited cover.
Options Within Your Income Protection Policy
Most Income Protection Policies can be tailored to suit your individual financial situation and budget.
The key choices within most policies include;
Amount of Cover – most policies now allow you to cover up to 75% of your income, but you need to determine how much of your income you need to insure.
Waiting Periods – this determines how long you need to be unable to work for before you are eligible for a claim. The options are generally, 2-weeks, 4-weeks, 13-weeks, 26-week and 52-weeks with the cost of the cover increasing with the shorter wait periods.
Benefit Periods – this is how long you would be entitled to continue to receive a claim. The most common benefit periods are to age 65 or 70 which is the deemed retirement age; however, if you want to reduce the cost of your insurance you can elect a 2-year or 5-year benefit period.
Booster Benefits – some policies allow you to boost your claim by 33% for the initial 3-months of a claim. This helps you adjust to a lower level of income and is especially important for long-term claims.
Dependent Relative Benefit – this will provide a monthly benefit should you need to give up work to provide full-time care for a relative who can no longer take care of themselves.
Retirement Benefit Option – this will ensure that your KiwiSaver contributions continue to be made while you are on a claim and therefore unable to continue to fund your retirement savings.
Mortgage Repayment Cover or Mortgage Protection Cover is designed to ensure that you and your family do not lose your home should you lose your income due to an illness, accident or death, and some policies also have a redundancy option.
Life Cover provides a lump-sum payment in the event of your death. The purpose of Life Cover is to provide financial compensation for the lost income from the deceased person. This is generally paid out as a lump-sum which can be used to repay debt and fund the future lifestyle for the family.
Total & Permanent Disability Cover (TPD)
This is a lump-sum payment should illness or injury mean an inability to work and provide income to meet your financial needs. You decide on the purpose of the funds, which are usually used to reduce or repay debt, provide home modifications, additional care or create an investment fund to generate ongoing income.
Total and Permanent Disability (TPD) provides a lump-sum payment should illness or injury result in a permanent inability to work, which will compensate for the financial loss of income.
This is cost-effective insurance to have within your risk management plan, but many people are not aware of it and most banks and insurance brokers do not use it.
If you are going to include it in your risk management then you need to make sure that you use the best policy definitions.
There are two commonly used definitions within TPD policies;
Any Occupation – this is the most commonly used definition; however it means that you are unlikely to ever be able to resume (whether for reward or otherwise) any other occupation or profession for which you are suited to by way of education, training or experience.
Own Occupation – this is the better definition to have with your TPD policy as it states that a claim would be paid if it was deemed that you were unlikely to ever be able to resume (whether for reward or otherwise) your own occupation or profession that you were employed in immediately prior to the commencement of total and permanent disability.
There are many occasions where you may be able to return to work in a lesser role (with a lower income) and therefore a claim under the “any occupation” would not be accepted; however, a claim under the “own occupation” would be.
There are other definitions too that cover more serious disabilities which are used for situations where you may not have been working at the time of a claim.
Trauma Cover provides a lump sum payment should you suffer a specific trauma condition. The specific trauma conditions are usually critical or serious conditions that are often life threatening and will have a significant financial impact to you and your family. Trauma Cover is also known as Critical Illness Cover, Crisis Cover, Major.
Medical cover provides funding to ensure you have access to private hospital treatment should you require it.
Why Do We Need Insurance?
When you look at your life, your family, your home or your business, you need to know that you have financial security when the unexpected happens. Consider:
What is likely to happen if I’m unable to ever work again?
What will happen to my family and their lifestyle if I die?
What is likely to happen if I suffer from a serious illness?
How will I pay the medical bills if I need an operation?
Will I be able to pay the mortgage if I’m unable to work for several months?
How will I pay to rebuild my house if it was to burn down or be damaged in an earthquake?
You want to be 100% sure that you have done everything within your budget to protect your loved ones and the assets that you have worked so hard to attain.