Case studies: difference income protection insurance makes
Case studies: the difference income protection insurance makes
Only about 15% of New Zealand adults have income protection insurance.
Only 20% of households would be able to cope with paying their household expenses and maintaining their lifestyle for more than 12 months if a serious illness stopped he primary income earner from working for three months or more.
The severe hardship many suffer because of serious illness and the gap between what they need to meet their commitments and what is paid in household income-tested state sickness benefits is largely avoided by those with private income protection insurance.
These are the stories, from insurance company files, tell of some who have fallen seriously ill, but have had income protection.
Help arrives to cope with theft on top of serious illness
Mrs A has a partner and children. She was diagnosed with a form of non-Hodgkin’s lymphoma and was unable to work while she received intensive treatment.
She had no sick leave to use and met the criteria for a $100,000 Living Assurance benefit which was paid out by her insurer not long after she was diagnosed.
Mrs A had an income protection policy with an 8 week stand-down period so eight weeks after her treatment started the insurance company started paying her a benefit of $15,000 a year ($1250 a month).
One of the side benefits of this benefit was an advance incentive payment where her insurer could pay 50% of the monthly benefit after the wait period was over and the other 50% when the first payment.
Mrs A initially declined the advance payment but when the wait period was over the company contacted her to double check that she wanted to wait. She explained that her daughter’s school gear had been stolen the day before and that the 50% benefit would be a help to purchase new gear. So that advance incentive payment was made that day. Mrs A continued to receive her monthly benefit while she was undergoing treatment. That enabled her to continue contributing towards her bills and supporting her children and partner.
Earthquakes compound stress and inability to work
Ms B was a self-employed consultant. She ran workshops and courses in Christchurch prior to the earthquakes. Her business had begun to suffer for about a year before the major quakes, in part related to problems in her personal life.
She had a stress related heart attack and was struggling to continue working. She was meant to be working in one of the buildings that collapsed in the February quake but was not able to attend that particular day.
All of these problems resulted in her incapacity to work. She had a Disability Income Policy. After the expiry of her wait period she received a monthly benefit for which she was very grateful. But most beneficial was the rehabilitation treatment to aid her recovery.
Her insurance company company paid for a psychiatrist and on-going psychological treatment with a clinical psychologist and regular supervision and assistance from an occupational therapist along with an exercise programme supervised by an exercise professional. Mrs B recently visited Auckland and met with her case manager to personally thank her for giving her life back. She was on claim and receiving a monthly benefit for 13 months. She has now returned to work fully and is working on building her business again.
Kidney cancer mum has her mortgage paid
Mrs V is a mother of one married and owns her own home. In July 2011 she was diagnosed with kidney cancer.
Her specialist told her the mass of cancer on her kidney was large and would need to be removed. The recovery period would be six to eight weeks.
At the time Mrs V was able to claim a temporary disability (sickness) benefit from her insurance company. This covered her home loan repayments while she was out of work, helping her focus on recovery without the financial pressure of making her home loan repayments.
Chemotherapy, selling your business and making sure your boys get to university
The Asteron insurance company has published what it calls “Pam’s Story”.
Pam was a qualified medical professional and a busy Kiwi mum with a husband and two teenage boys. She died just before Christmas Eve in 2009, a few short weeks after sharing this story.
Pam, 53, had always wanted to own her own business, and in 1989 she went out on her own to fulfil her dream. Within a year the company had grown so much she had to take on another person.
“It was a very busy time” says Pam. “I had gone back to university after having the boys (who were both under four at the time) and I was doing a PhD and teaching at Massey in Wellington for a few days every year, as well as working full time in my business”.
In November 2003 Pam went to see her doctor about some pain she was getting in the centre of her chest. “I was reluctant to take myself to the hospital – my husband was out of town at the time and I wanted to wait for him to get back!” she remembers.
When Pam eventually made it to the doctor she was surprised to find out that she had chronic pancreatitis. Pancreatitis is a serious disease which was causing her pancreas to become very inflamed. “It initially took a while for the doctors to work out what was wrong” she explains. “Now we know it’s just one of those things that happens – idiopathic, the doctors said – meaning we can’t actually say what causes it.”
Although the doctors said it wasn’t fatal, the pancreatitis had a significant impact on Pam and her family. The disease meant that she needed to take medication to manage the pain. “I had to give up study just because taking painkillers means your brain doesn’t function as well as it can,” she says. She also had to give up teaching at Massey University. “I couldn’t manage driving to Wellington to take lectures.”
“At the time I had two young children and my husband was staying home to look after them” she says. “I think until you have dependents you think, well, you’ll just manage through, but when you’ve got children and you’ve got a mortgage and a business and all sorts of other things, you have to think, well, if something did happen to me, things would really go down the tube!”
“So the question that the broker posed to me was, ‘if something happened to me, how would I look after the children?’ What sort of money would we have as a family? And you know, it made me realise we hadn’t really thought about what we would do”.
“I didn’t realise until years later that my father had actually had the same insurance. He was a house painter and he had taken out loss of income insurance for the same reason – he had four young children and if something happened to him on the job, he thought ‘how would he support his family’?”
When Pam was first diagnosed, she started to think seriously about selling her business.
“I thought the only way was to sell it was without someone knowing how sick I was – if they’d known, it just would have been a fire sale! With all the work I’d put in over the years, I wanted to get something out of it. So I needed to keep it running”.
It was a tremendously difficult time for Pam, as she tried to put on a brave face for clients and colleagues while she ran her.
“I couldn’t have coped without it. This has ended up being our only source of income.”
“The insurance was more of a ‘just in case’ thing. I thought, well, I might be off for a couple of weeks if I’ve broken something or fallen over!”
But having insurance has made the crucial difference between struggling and keeping afloat after she was diagnosed with the cancer. She’s quite open about this.
“Without the income protection, life certainly would have been very different for us” she says candidly. “The whole family is living on it now”.
Getting out and about is not easy nowadays, and Pam is at home on the telephone as she shares her story in early October, 2009.
“I have to use a wheelchair to get around now” she explains. “All the doctors’ appointments keep me busy. They’re the only thing I go out for and I enjoy the fresh air.”
Pam’s boys are now old enough to have part-time jobs, and she’s pleased that she and her husband are still able to give them some pocket money. More importantly, she says, she’s now able to pay for their financial future. “They’re going off to university next year. I don’t know whether I’ll be here to see them start. Their new life will be opening up for them as their old life closes down.”
When asked how much having income protection has impacted her over the last few years, Pam is very clear. “Having the income protection has been a godsend”.
“If my family and I were having to manage on an invalid’s benefit, I would not even have enough money to travel to Palmerston North for the chemotherapy” she says frankly. It’s a difficult thing to imagine.
In May 2009 Pam returned to the doctor for a check-up. She received some very distressing news – her pancreatitis had evolved to metastatic pancreatic cancer and she was given less than a year to live.
Like most people, this is something she never thought would happen to her.
Pam says that paying for life insurance as well as income protection can feel like a lot of money, but in her opinion, both are essential. “With the money I’ve received for the life insurance (an advance payment due to terminal illness) I’m going to pay for my funeral. I’m also going to pre-pay the university accommodation and fees for the boys. It’s all set up now and to be honest it’s a big worry off my mind and off the boys’ minds too” she says.
Pam has retained a sense of whimsical humour about life and income protection insurance and is well aware of how most of us perceive it.
“It’s one of those things that you think you probably won’t use, that you’ll get up to your 70s and 80s and stop paying your premiums because you’ve had it too long!”
But she is serious about the need for it. “To the person who has no life or income protection insurance, I would suggest you get it. Even if you’ve got two income earners, it’s still important.”
“If we didn’t have it, we would have had to sell our house in order to have something to live on, and go rent somewhere. Everything would have been so different. For us, it’s been a godsend.”
Pam died just before Christmas Eve in 2009, a few short weeks after sharing her story.