If you were asked to name your most valuable asset, what would you choose?
Your car? Your house? Maybe your education? For most people, the correct answer is most likely their income.
Your ability to earn throughout your life is a huge asset. Your house might be worth $1 million, but if you earn $75,000 a year between the time you’re 25 and 65, you’ll bring in three times that – and that’s not accounting for any pay rises.
Read on to learn more.
The foundation
For many people, regular income is the backbone of their financial lives. They count on it to pay the bills, keep food on the table, and service a mortgage. They use it to drive investment strategies and build wealth.
One study found that a third of New Zealanders were living from paycheque to paycheque, completely reliant on the ongoing flow of money coming in.
Another earlier poll from the Financial Services Council found about half of employed people could not stay afloat for more than a month if they did not have any income coming in.
What it’s worth
As well as the effect of income multiplied over years that we illustrated above, regular income helps you to get ahead.
Someone with sufficient regular income, for example, is more likely to be able to pay down a mortgage and build equity in a property and are more likely to be able to pay bills on time and avoid late fees and penalties. They may also be able to take advantage of investment opportunities that come their way.
If you have kids or other members of your family depending on you, your income may feel even more important.
It can be vulnerable
It’s more common than you might think for people to be off work due to long-term sickness. The Financial Services Council has estimated that more than 1000 families a week experience a sickness that prevents one of their main earners working for three months or more.
While ACC could step in and cover up to 80% of your income if you are off work due to an accident, if you’re sick and unable to work for a period, you’re generally on your own.
If you’re in a relationship with someone who also earns an income, it can be hard to qualify for any assistance from the Government if you’re off work due to sickness rather than an accident.
And even if you do have an accident and qualify for ACC, once you’re recovered enough to work in a “suitable role”, ACC will generally require you to get back to work, even if it’s paid at a lower rate and/or a different job than you were doing before the accident.
Protection is available
The solution? Income protection insurance offers cover for situations in which you’re off work due to illness or injury. It can be more flexible than ACC and you can tailor it to fit your needs.
If you’re looking for income protection, our quote compare tool is a great place to start. And if you have any questions, get in touch: we can help you work through the options available to work out what cover will provide the protection you most value.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.
