A Word (or two) About Income Protection Insurance

Thankfully my WINZ experience ended before I went completely round the bend.

Maybe I got sucked in by the TV commercials saturating Australian television promising “peace of mind in times of uncertainty and stress” or possibly I experienced an uncharacteristic attack of astute financial foresight.  Either way, I was grateful that I decided when I was living in Newcastle that it would be prudent to take out Income Protection Insurance.

After spending minimal effort on any meaningful research, I selected a broker and duly set about completing the application form.  Although I had no particular health issues at the time, I dismally noted my family’s propensity to various types of cancer and wondered if this was going to be a wholesale waste of money given that any claim incorporating the merest hint of the C word would doubtless be rejected.  Besides that, once you pass the half century mark you’re not likely to come out on the winning side once you’ve had your medical records scrutinized by an enthusiastic assessor pursuing that holy grail of insurance KPIs:  A Pre-existing Condition.

Despite this, I went ahead with the policy and kept it going after I returned to New Zealand, adjusting the monthly benefit amount so that it was in line with my lower New Zealand earnings.  In fact, I had to keep adjusting it on a yearly basis as my Australian based insurer was clearly labouring under a misguided fantasy that annual pay increases were actually a thing on the other side of the Tasman.  Although they try to advise you not to decrease it, it’s foolish to be paying for more than you’re earning since you can’t claim more than the loss resulting from the situation and financial evidence of your earnings for the previous year is required at claim time.

In this regard I was somewhat unlucky.  Because of the redundancy and subsequent period of unemployment, my earnings for the twelve months prior to my disability were down by nearly four months, which in turn meant that my income protection claim would be adjusted accordingly.  As with all standard income protection policies, none cover job redundancy, only disability caused by an accident or illness.  Redundancy Protection could have been added at an additional cost, however the cost was significant, so I had just opted for the standard policy.

On the extremely fortunate side of the equation though, I had fortuitously and without knowledge aforethought, chosen an insurer who covers multiple sclerosis in their income protection policy whereas many insurers will not.  As I have absolutely no family history of multiple sclerosis and nor was I experiencing any symptoms at the time of taking out my policy, so I certainly wasn’t investigating the ‘MS friendly’ insurers.  I can only assume that the lack of cover for Multiple Sclerosis is that it generally affects people over a long period of time and for people with the relapsing/remitting variety, its symptoms can be sporadic.

There was  yet another potential fish hook with this policy.  I had taken out the income protection cover in 2011 when I was living and working in Australia and intending to live there permanently.   When I was living in Australia (like all New Zealand migrants), I had a temporary visa or special category visa unique to New Zealand citizens therefore, although I could live in Australia indefinitely, I didn’t have permanent resident status.  For some income protection insurers, having permanent residency is a must in the event of a claim so that even if I were still living in Australia, I would still not be able to claim (as many New Zealanders have found to their cost).  Again, by sheer good fortune and without my having done any advanced research, AIA claims are not dependent on this.

In the face of my negative expectation that I would meet the criteria required to claim a cracker from my income protection policy, I contacted my broker in Australia who turned out to be incredibly helpful.  I duly filled out the multitudinous forms, complete with financial statements and lists of doctors, specialists etc that I’d visited over the past three years.  The final lodgement form comprised nearly fifty pages of information relating to my claim.  It would almost be enough to deter people from claiming at all, particularly those coping with an illness that may affect their cognitive abilities.  Having said that, it was a huge improvement on the rigmarole I’d had to go through with WINZ and for a much less generous reward.

As with most income protection policies, there was a waiting period which in my case amounted to four months.  Four long months where I had to rely on a WINZ benefit supplemented by a few hours here and there over the Christmas/New Year period.  Needless to say, the wait seemed like an eternity.  After rent and direct expenses relating to my disability were deducted, I was left with $45.00 a week for food, electricity, phone etc.  That’s a fiscally fraught juggling act even when you’re not disabled.

The story does however have a fortunate ending.  In early February 2017, I received the news from AIA that my claim for partial disability had been approved.

I’ve got to admit that there were times, particularly after my redundancy when I struggled to pay some of those premiums.  Although there are some hard luck stories surrounding income protection insurance, I would urge anyone to do their research and to think seriously about taking out income protection insurance … I’m certainly glad that I did!