Remember the last time you bought a car?
You called the insurance company straight away, right? And didn’t dare drive it without it first been insured.
Likewise, it would be crazy to buy a house and not bother insuring it. But consider the facts:
- 8 out of 10 households have someone with vehicle insurance
- A staggering 76% of New Zealanders between the age of 18-64 have no income protection
- 47% of employed 18-64 year olds couldn’t maintain their standard of living after leaving their job for 4 weeks
1 in 5 New Zealanders think wrongly that ACC covers long term sickness that prevents employment.
When it comes to insurance, New Zealanders place much greater emphasis on their cars and homes than their lives and future income. The Financial Services Council produced a report showing that while more than 95% of cars and homes are insured, only 57% of New Zealanders have life insurance. Less than 20% have income protection insurance.
This same report says 60% of people surveyed about insurances found the area of personal risk insurance ‘too hard’ so just never got around to it. The insurance industry can share some of the blame for this by not making it easier to understand the process, products and how to get value for money.
Imagine if you had a machine in your back yard that printed $60,000 every year (or whatever your annual income is) until you turned 65 and would continue to do so unless it broke down. Wouldn’t you want to insure that machine? You can see where this is going. Most people don’t realise they are that machine.
It’s not your car or your house that is your biggest asset. It’s your ability to earn an income over a life-time that actually pays for all of that stuff and more. For example take an income of $60,000 over 40 years and its $2.4 million
My personal income protection policy costs me 0.7% of my personal taxable income. If anything happens to me, it means my family and I will receive money every month (inflation adjusted) until age 65 or I’m medically able to go back to work. If I chose a policy that only paid me out for two years it would halve the cost to about 0.35% of my income but still provide me and my family with a much greater level of security and peace of mind.
That security is important for me because I work really hard every day for what I have. It’s worth paying that 0.7% to make sure I get to keep what I have worked so hard for and protect against any future loss of income so I don’t have to sell any assets or go backwards should something unforeseen happen.
Insurance is something the majority of us don’t like having but know it’s something we should have. It’s like one of those chores you make excuses for not doing every week and never get around to. Market research also shows people feel this way but don’t know how much they need and don’t feel confident purchasing it because they don’t know where to obtain objective advice.
So don’t leave it in the too hard basket for when it’s too late.
