Is Your Income Important?

For most of our income is very important, it is what pays our mortgage, put’s food on the table and covers our living expenses.

It also pays for our holiday and (hopefully) provides for our later retirement. So, what would life look like if we become sick or disabled and unable to work? Would we lose the house because we could not pay our mortgage? What kind of retirement would we have if we could not afford to contribute to our KiwiSaver or other retirement investments?

If you earn $60,000pa, after 20 years that’s $1,457,842 and that’s a big asset in anyone’s book! Over 25 years this amount becomes almost $2,000,000! What if you earn $100,000? Over 25 years that’s over $3.2m! (assumes a long-term inflation of 2%pa).

Most life insurance companies offer income protection insurance so you can protect this valuable asset – for most people, their most valuable asset.  Income protection cover should be carefully tailored to your specific needs and requires professional advice to ensure you get this right. If you are self-employed it should fit with your ACC cover. You may also be able to reduce your ACC Levies to help pay for your income protection cover. Remember also that ACC will not pay you any benefit if you are off work due to sickness, and will likely not pay due to age-related degeneration.

Those who rely on their income from working to pay for the current and future lifestyle should seriously consider whether income protection is right for them.  It costs nothing to obtain professional advice on this.