Insurance survey suggests only 20% of New Zealanders have income protection insurance compared with 95% who have their car and home covered

What a silly statement by Jenny Shipley.  We had income protection insurance during the childrens preschool years at the time when losing the single income earner was high risk.  Then when they were of school age and we had the option of two incomes - we dropped it.  We had life insurance throughout the time when we had a mortgage - such policy being to the value of the outstanding debt - so that if one partner died - the other would own the property without encumberance.  When we paid off the debt, we dropped that too.  We have had car and house and contents insurance throughout.

20% of folks with income proptection would be about what I would expect for a population of people making decisions to purchase insurance based on need/personal circumstances/risk assessment. 

Placed "greater value on their assets than their lives, household income and their family’s future."

Yep, it sure is a shallow comment.

Just like health insurance, if you are healthier than average, it makes no sense financially, to get health insurance.

She's trying to "create a need", the first step of marketing. To up the guilt factor.

I don't know why anyone bothers. NZ is generous with unemployment benefits. I'm sure my wife would eventually find someone else if I karked it.

I am an insurance advisor and am always interested in the issue of income protection.

It never ceases to amaze me how many people don't consider their income something worth protecting.  The most common reason is oh it costs too much.  These same people generally have life insurance, which quite often they don't even really need, House insurance car insurace etc.

Just this weekend one of my best friends cancelled his income protection because he has almost paid off his mortgage.  I just don't understand why people think they only need to insure their income if they have debt.  Its not like you don't need money just because you have paid of your house.

I appreciate and indeed expect that people will only insure what they see as important but would love to know the views of my fellow interest.co.nz readers on why they do or do not have insurance.

Also what is your general view of insurance advisors now that we have gone through regulation and had to become either an RFA or AFA?  Has it changed your perception in any way?

Cheers

is it true that the first two years premium on a life policy is paid to the insurance rep who closes the deal if so then my opinion on advosors hasn't changed.

THEY SPEAK WITH FORKED TONGUE

Income protection insurance is pretty expensive compared to the others.  We've got a 2-year old child and are on a single income so we've got it.

But it only really covers loss of income for a limited period of time.  Therefore if you have enough liquid or near-liquid assets, available credit or passive income then you can self-insure instead.  I imagine many do.  Once the wife is working again and our financial padding is built back up we'll be dumping it.

Despite being paid on commission our insurance brokers were quite upfront about the need to adjust insurance to suit lifestyle.  This includes reducing insurance as your asset base increases and obligations reduce.

Personally I'd put this down to a healthy scepticism about the coverage being offered/width of the exclusion clauses in the policies/cost-benefit analysis based on one's circumstances.

Or am I being hopelessly optimistic about the financial savvy of my fellow New Zealanders?

My income protection is having a chunk of change in the bank for emergencies, and the ability to travel/work anywhere from London to Singapore to Australia to NZ, and I'm an IT contractor so am out of work on a regular basis - at present I'm working but I'm out of a job at Xmas time.

I have very little time for insurance companies (because as a rule they suck) and would rather rely on my own flexibility and skills to carry me through.

And I don't own a car either, which is totally marvellous. Cars are so last century.

People are always worried about the possibility of redundancy, so why not do something about it and get income protection insurance, then you are not completely at the mercy of an employer or sickness if the worst happens, life insurance is not only if you have a mortgage/debt, think of it as a "hand up" for those you leave behind when you are no longer around to provide that support.  I also have heath insurance as I need the best possible medical care to ensure I can stay around as long as possible.  Shop around and get the best possible price  - just like you do with the car and home/contents policies.  Shipley's comments are misguided, it's not that people place less value on their lives, they simply just don't understand what's available and what's possible today.  Just explaining my personal policies, how much they cost, how I have tailored them and the protection they provide surprises family and friends.  Prior to this it was easier for me to ignore the possibilities and just hope for the best, this is about taking control and ensuring you and your family are taken care of - and no I don't sell insurance - I work in IT...

I put my back out a few years back. Had to take a day off sick from work to go to the doctor. Came right a few days later, never had anymore issues.

Lately, the Income Protection Insurance company that I approached to get cover, has deemed me an unacceptable risk, as clearly i'm now - in their opinion - one step away from needing a wheel-chair, would only insure me with a 100% loading on the premium, as well as excluding any form of back injury. Full-stop, the end of the matter.

Needlessly to say, I told them where to go. If I hadn't declared this injury, all the premiums would have been in vain, as they'd never would have paid on any claim in any case.  Been living happly ever after without it. Sometimes, it's just too hard dealing with insurance companies. Bank the premiums, and have a savings plan instead.

Seems a pretty meaningless survey to me when you factor in what is not included.

ie: Those that carry their own ICPI via a mixture of an emergency fund, investments and not carrying debt.

Which would you choose if you were aged 45 and became so disabled you could no longer work in your current occupation?

Option 1: Work in another job that only pays half as much as your current job, and with less income you need to sell your home  and rent, or sell down and shift to a smaller cheaper home in a less desirable neighbourhood, and earn enough to meet your basic living expenses, but not save enough for any decent holidays, or retirment income; or

Option 2: you receive 75% of your current income, inflation adjusted each year, right through to age 65. While yo uneed to 'tighten your belt' a fair bit, you can still maintain something pretty close to your current lifestyle, and stil meet debt repayments and most of your savings goals

Option 2 seems the better option, but it does require youto put aside up to 3% - 4% of your income now and every year. Of course, if you're fortunate enough to never become disabled, this could be seen as wasted money.

Of course, Option 2 is where you are paying for Income Protection Insurance!

Many of the comments are examples of a lack of full understanding of how Income Protection works, and the need to seek advice from a Financial Adviser who specialises in Income Protection.

Ultimately, any insurance simply gives you greater choices.

Optoin 2 gives you more options, without insurance your options are limited.

One comment was that you could sell your home if you lost your income, but if you were in that position you woudl be selling your home because you have ot , it may not be an option.