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More Kiwis have income protection insurance

4 March 2015

Media Statement

More Kiwis have income protection insurance to maintain their incomes when long term illness prevents employment

In the year to December 2014 some $722.3m in premiums were being paid on income protection policies to protect people’s income when ill, suffering trauma or disability, $254.9m more than five years ago, according to latest figures compiled by the Financial Services Council (FSC).

FSC Industry Statistics for December 2014 show annual premiums in force (incorporating trauma replacement, income and lump sum disablement) totalled $1.9billion.

Total annual premiums in force for life and income protection insurance have grown by 43% over the past 5 years far outstripping inflation of around 10% over that period.

FSC Chief Executive Peter Neilson says the strong growth in income protection coverage is particularly welcomed.

“The good news from the latest numbers is that more New Zealander’s now have coverage for the most likely threat to their financial position, being unable to work because of long term sickness.”

The statistics covering trends over the past five years shows income protection insurance premiums growing by 54.5% over the period. This is consistent with growing income protection coverage as general inflation was only 10.4% over the same period.

“Whereas most New Zealanders with dependents and debts (like a home mortgage) have life insurance, only about one in five New Zealander’s traditionally has had income protection insurance protecting their most valuable asset, their ability to earn an income,” Mr Neilson says.

“FSC research indicates most New Zealander’s do not know that they are 2.6 times more likely to be off work for six months or more after a serious illness than following an accident.

“While 80% of earners’ incomes are covered by ACC for an accident, households with annual incomes of more than about $20,000 do not qualify for sickness benefits.

“Our research in late 2012 indicated 972,700 households with incomes of $20,000 or more a year had no income protection. Main income earners were falling ill for 3 to 6 months in 13,030 households a year (compared with 10,300 suffering income loss from accidents). In 14,980 households the main income earner was ill for 6 month or more.

“Once the main earner’s annual and sick leave ran out 53% of those renting couldn’t pay rent after 8 weeks. Among home owners, 50% could not meet their mortgage payments after 9.4 weeks.

“Many New Zealander’s don’t know until it is too late that the family income test for a sickness benefit makes most earners with a working partner ineligible for a sickness benefit. Having a long term sickness that prevents employment like cancer treatment, a stroke or a major heart trauma is the greatest vulnerability most working New Zealander’s face,” Mr Neilson says.

Five year trends in Income Protection Insurance Premiums December 2009 - 2014
Income Protection Insurance31/12/200931/12/20145 year
Category$,000$,000Change
Trauma193,640332,74471.80%
Replacement Income234,155324,67438.70%
Lump Sum
Disablement39,56864,82163.80%
______ ______
Total Income Protection Insurance467,363722,23954.50%


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