More Kiwis have income protection

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Income protection cover rates have improved, the latest Financial Services Council statistics show.

Wednesday, March 4th 2015, 3:27PM 2 Comments

In the year to December, $722.3 million in premiums was being paid on income protection policies, $254.9 million more than five years ago.

FSC industry statistics for December 2014 show annual premiums in force, incorporating trauma replacement, income and lump sum disablement, totalled $1.9 billion.

Total annual premiums in force for life and income protection insurance have grown by 43% over the past five years, outstripping inflation of around 10% over that period.

FSC chief executive Peter Neilson said the strong growth in income protection was particularly welcome.

“The good news from the latest numbers is that more New Zealanders now have coverage for the most likely threat to their financial position, being unable to work because of long-term sickness.”

The statistics covering trends over the past five years shows income protection insurance premiums growing by 54.5% over the period. This is consistent with growing income protection coverage as general inflation was only 10.4% over the same period.

“Whereas most New Zealanders with dependents and debts have life insurance, only about one in five New Zealanders traditionally has had income protection insurance protecting their most valuable asset, their ability to earn an income,” Neilson said. 

“FSC research indicates most New Zealanders do not know that they are 2.6 times more likely to be off work for six months or more after a serious illness than following an accident. While 80% of earners’ incomes are covered by ACC for an accident, households with annual incomes of more than about $20,000 do not qualify for sickness benefits.”

He said FSC research showed 972,700 households with incomes of $20,000 or more a year had no income protection.

Main income earners fell ill for three to six months in 13,030 households a year, compared with 10,300 suffering income loss from accidents.

In 14,980 households the main income earner was ill for six month or more.

“Once the main earner’s annual and sick leave ran out 53% of those renting couldn’t pay rent after eight weeks. Among homeowners, 50% could not meet their mortgage payments after 9.4 weeks. Many New Zealanders don’t know until it is too late that the family income test for a sickness benefit makes most earners with a working partner ineligible for a sickness benefit. Having a long-term sickness that prevents employment like cancer treatment, a stroke or a major heart trauma is the greatest vulnerability most working New Zealanders face,” Neilson said.

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