Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Income Protection Insurance May Not Be Fit For Purpose

Business Owners Income Protection Insurance May Not Be Fit For Purpose!

Many business owners have taken out Income Protection Insurance (to protect their families) that in the event of a claim only a portion or in some cases no benefit would be paid out in the short term. What’s worse is many company owners will pay these premiums for life not realising that they have wasted their money.

The issue arises around the insurance company’s definition.

For Loss of Earnings Cover if you are disabled they will calculate your benefit payments as the lesser of:

1. (A-B) X 75%; where:

• A = pre disability income

• B=monthly income and other income received while disabled

For Loss of earnings Plus Cover they will calculate your benefit payments at the greater of;

1. (monthly benefit- B); and

2. (A-B) X 75%; where:

• A = pre disability income

• B=monthly income and other income received while disabled

In either case any income you receive from your business would be offset against your Income Protection Insurance and mean that the benefits you were counting on from your Income Protection Policy may not be paid out come claim time.

Des Morgan a Business Insurance Consultant with The Portfolio Company Ltd said

“It is important that Business Owners income protection be aligned to their shareholders buy sell agreement. As an example if the buy sell agreement stipulated that in the event of an illness the shareholder salary would continue for one year then your Income Protection Plan should have a 365 day wait agreement before benefits are payable . This longer waiting period will substantially reduce your premiums.”

He said another solution if you have a mortgage is to take out Mortgage Protection Insurance which pays your Mortgage payments in the event of illness. Many insurance companies allow insuring either 40% of income or 110% of your mortgage payments and this benefit for many insurance companies would not be considered other income when claiming against your Income Protection Benefit.

For further information on Business Insurance go to


© Scoop Media

Business Headlines | Sci-Tech Headlines


Commerce Commission: Appeals Record $2.25m Fine In Vodafone FibreX Case

The Commerce Commission has filed an appeal in the High Court against a record $2.25 million fine imposed on Vodafone NZ Limited (Vodafone) for its offending under the Fair Trading Act during its FibreX advertising campaign. While the sentence imposed in the Auckland District Court on April 14 was the largest-ever fine under the Fair Trading Act, the Commission will argue that it is manifestly inadequate... More>>

All District Health Boards: Historic Pay Equity Settlement

An historic agreement has been ratified that addresses a long-standing undervaluation of a workforce that is critical to the smooth running of our hospitals and the delivery of healthcare... More>>

MPI: Dry Autumn In Waikato And South Auckland Leads To Drought Classification Drought conditions affecting the primary sector in the Waikato and South Auckland were today classified as a medium-scale adverse event, enabling a package of support for farmers and growers... More>>

Barfoot & Thompson: Rents Up By Around 3% In Most Areas

The average weekly rent paid for homes in most areas of Auckland has risen by around 3 percent year-on-year. The figures for end March from more than 16,000 properties... More>>

DoC: Smeagol The ‘Gravel Maggot’ Leaves Its Rare Mark On The Remote West Coast
An extremely rare species of sea slug or ‘gravel maggot’ has been detected for the first time on a remote beach in South Westland... More>>

Immigration: Annual Net Migration Loss Of 7,300

The provisional net loss of 7,300 people in the year ended March 2022 was the lowest net migration for a March year since 2012, Stats NZ said today... More>>