If you are full time self-employed and you have not restructured your ACC, you are a bloody numpty

Yes, I called you a numpty! There's a reason for this.

As a self-employed person when it comes to accident injuries you have to prove your income to get weekly compensation paid.

Insurance adviser or insurance broker, what’s in a title?

Quite a bit actually. “Are you an insurance broker?” is a very common question. Yes, sort of, is the answer.

That’s because, under the regulations we have, we’re insurance advisers, not insurance brokers.

What’s the difference?

Self-employed? Yup.

Sick of hearing about ACC and health and safety? Yup!

Ok sorry I've got news for you, neither is going away in a hurry. Actually the health and safety bit is going to get worse. I'll talk more about that in another post, as there's a few things going on in the background I'm looking at for clients.

Back to the self-employed and ACC thing.

Offsets are one of the most contentious and least understood provisions of an Income Protection contract with policy holders.

Why?

Simply it's not a selling point so it's glossed over in the advice discussion.

Keep in mind, having some cover is better than no cover, but having the right cover is even better.

I'm going to explore offsets in this article so you have a better understanding of what this may mean to you.

In our opinion in all situations Agreed Value is. Yes, there are some clever tricks you can play with tax and claims on indemnity or loss of earnings, but the vast majority of claims just don't work out like that at claim time.

In my experience when it comes to Income Protection claims, indemnity claims cause the most headaches. In my time as a manager looking after advisers and as an adviser myself, the only problematic claims I have had were indemnity claims. Agreed Value never had the drama and hassle.

The short answer: depends.

The longer answer: maybe, maybe not.

No I am not trying to be difficult, it does depend on the policy you have so maybe, maybe not.

The simple answer:

If you have indemnity or loss of earnings yes, it is tax assessable. If you have agreed value, it is generally not tax assessable. But there's more, no not a set of steak knives, really there's more.

Interesting question, up there with what's the best value income protection?

The answer to both questions is a good quality income protection solution. It will both work at claim and give you great value as a result. The way to do this is talk to a good adviser who will arrange this for you, that's me.

If you mean best value equals cheapest premium, then you have to ask the question do you expect to claim? If not, why have it? Cheapest like most things in life usually translates to inferior.

Obviously, if you are laid off, but when is it going to be the most use to you?

Often there are comments redundancy protection is expensive relative to the cost of income protection. For those looking at income protection under the age of 40 this is often the case. Income protection pays up to age 70, redundancy protection only pays up to 6 months, with redundancy protection sometimes costing more than income protection for those under 40. Cost is relative, for a 50 year old it can be less than 25% of your overall cost of income protection even though redundancy protection premiums are the same for all ages.

Let's have a closer look at this picture.

You have a mortgage which is why you're probably asking this question, so the logical leap is you have a mortgage because you either don't have the financial resources not to or you wish to leverage your capital for the maximum return. Either way you have taken on a financial risk by having a mortgage.

If things go to plan and nothing happens to you or your property then the risk has not been realised, the question then becomes what if the risk is realised?

Mortgage Protection Insurance is how you go about mitigating this particular financial risk.

Taking a lead from a colleague on blog questions, I've talked extensively on what is income protection, how it works and how to apply it to your situation. What I haven't explained is what it is likely to cost you.

Taking into account that everyone has a different situation, occupations, levels of income, medical history and available financial resources I am going to football the averages for you.

Today in New Zealand the average gross taxable income for earners is about $55,000. I'm going to use this as my base income to establish the cover level using a net of tax, agreed value approach.

Also called premium waiver or premium cover. In a nutshell, it is insurance for your insurance premiums. Ok stop there! Before you go 'huh? I don't need that', consider the following.

The point of waiver of premium benefits is to pay your policy premiums when you are disabled and unable to work. Extending this logic, if you are disabled and unable to work, your income has likely stopped or reduced, often significantly.

If you have a reduction in income due to a disability, it is likely you may miss a premium payment or two. Miss three (months) and your insurance cover will lapse.

If you are pregnant or looking to have children, this is a great question to be asking.

To start with, you will be focused quickly on how baby is doing and finding the right baby things for you to be using, then after baby arrives, you will be too busy with baby to think about insurance.

One insurance thing you do need to put on the to-do list, is adding baby to your medical insurance cover within three months of arriving, this article talks more about baby. This post is about you as mum.

In general, if you have income protection you will have some disability coverage for the first 12 months after finishing work, if you are on maternity leave for longer than this, then things get a little more interesting.

I cover a lot of ground in this post, though a bit of a lengthy technical one. Maybe that's part of the reason protecting incomes is not high on the completed tasks list, as policy details can get quite complicated.

I have mentioned before that income protection in New Zealand is not something that is well covered, much like the rest of the world. With about 80% of the population without financial support in a non-accident disability situation. This comes with potentially limited support with ACC. There is a lot of exposure not only for you personally, but also for your family members, co-workers, suppliers and clients.

What is the real risk?

Let us say you are a builder and you take a tumble off the roof on a job and break your pelvis. (There have been one or two of these situations, it does happen) You are carted away in an ambulance to emergency and they patch you up.

You are now looking at 12-13 weeks for recovery. You will need assistance for things you never thought you would, nor will you like it much.

After 7 days, ACC will be paying to replace 80% of you provable tax assessable income, which is also tax assessable, and you are still lying in a hospital bed. At this stage of the game, you are starting to do your head in and depression is a real risk for you.