Buying health and life insurance is still a culture in New Zealand, but Kiwis skimp on income protection cover, according to Rival Wealth financial adviser Tim Fairbrother.
According to a report from the NZ Herald
, figures from the Financial Services Council revealed that only a quarter of households include someone with income protection insurance.
The report said that only about half of employed people, aged 18 to 64, realise that if their partner earns $30,000 or more, they will not receive a benefit if they fall sick. And almost half those employed people said that if they ran out of sick and annual leave, their household expenses and standard of living would be hard to meet and maintain.
About 30% of new clients have income protection cover, Fairbrother told the NZ Herald
. “Most of them have it structured incorrectly.”
Russel Hutchinson, industry commentator, said clients may consider a “goals-based” approach to determine what level of they needed.
"If you can't work, what do you want to happen? You might say 'I still want my kids to go to uni, or to fund my super.' But when you look at the numbers required to do that, the problem is that [the cover] is so expensive that no one buys it,” Hutchinson told the NZ Herald
He said there was a perception that income protection cover was expensive. "If you're 30 and you quote for life cover you might get $1 million for $30 a month and people think that's good value. But if someone earns $100,000 and you want to insure them for $75,000 until age 65, that might be $200 and people think that's expensive. But the actual sum being insured is about $6 million."
Rather than replacing a client's total income, it could be more affordable to only get as much cover as needed to cover expenses, Fairbrother said. "Cover your mortgage, power and phone – it's something rather than nothing and you won't be going out for dinner every second night anyway."
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