Income protection insurance is a valuable safety net for many New Zealanders, providing financial stability if illness or injury prevents you from working. However, finding the best rates can be tricky, as premiums vary widely based on factors like age, occupation, lifestyle, and coverage preferences. Fortunately, with a little knowledge and proactive planning, you can secure a policy that offers both protection and affordability.
Here are some tips for getting the best income protection insurance rates in New Zealand.
1. Understand Your Coverage Needs
The first step to finding an affordable income protection policy is understanding your specific needs. Coverage options can vary, including how long the benefit will be paid (benefit period) and the waiting period before payments start. Opting for a longer waiting period or shorter benefit period can significantly reduce premiums, but you'll need to balance these factors with your financial circumstances.
Review your monthly expenses and determine how much income you'll need to maintain your lifestyle during a period of illness or injury. Also, consider any other forms of financial support you might have, such as savings or a partner's income, which could help bridge the gap.
2. Work with an Adviser
Just like with any other type of insurance, it pays to shop around for income protection insurance. Different insurers assess risk factors differently, which means premiums can vary substantially between companies for the same level of cover.
When comparing quotes, ensure you're looking at policies with similar terms, including waiting periods, benefit periods, and coverage amounts. Work with an insurance broker who can help you navigate the options available and find the best deal.
3. Maintain a Healthy Lifestyle
Lifestyle factors, such as smoking and weight, can significantly affect income protection premiums. Insurers often charge higher rates for smokers due to the increased health risks, and a higher Body Mass Index (BMI) can also lead to increased premiums. Check your BMI here.
Taking steps to maintain a healthy lifestyle – such as quitting smoking, exercising regularly, and eating a balanced diet – can not only improve your wellbeing but also reduce your insurance costs. Some insurers even offer discounts for policyholders who demonstrate healthier habits.
4. Choose the Right Occupation Class
The risk level associated with your occupation affects your income protection insurance premiums. Jobs that involve physical labour or higher-risk activities often attract higher premiums, while lower-risk office jobs typically come with more affordable rates.
If you have a role that includes various tasks, emphasise the lower-risk aspects of your job when applying for coverage. For example, if you work in a managerial position within a construction company but spend most of your time in the office, make sure to communicate this to your insurer.
5. Consider Age and Policy Structure
Age plays a significant role in determining income protection premiums. Younger individuals generally pay lower premiums, as they are perceived to have a lower risk of needing to make a claim. It can be wise to lock in a policy while you're younger to secure lower rates over the long term.
Additionally, some policies offer level premiums, which stay constant throughout the life of the policy, rather than stepped premiums, which increase as you age. Although level premiums may initially be higher, they can be more cost-effective in the long run.
6. Take Advantage of Group Policies
Many employers offer group income protection insurance as part of their employee benefits. These policies can be more affordable than individual plans since they are based on a group risk rather than personal risk alone.
If your employer provides such a benefit, consider taking advantage of it. Even if you already have an individual policy, a group policy could offer supplemental coverage at a lower cost. However, keep in mind that group policies may have more limited options for customisation.
7. Review and Adjust Your Policy Regularly
Your financial situation and coverage needs can change over time, so it's wise to review your income protection insurance policy periodically. Adjusting your coverage to reflect your current income and financial responsibilities can help you avoid overpaying for insurance you don’t need.
Regularly reviewing your policy also allows you to take advantage of any potential rate reductions or new discounts that may have become available.
8. Bundle Policies for Discounts
Many insurers offer multi-policy discounts if you purchase multiple types of insurance from them, such as combining your income protection with life insurance or health insurance. Bundling policies with the same insurer can lead to significant savings while simplifying the management of your insurance plans.
9. Seek Professional Advice
The world of income protection insurance can be complex, and finding the best rates may involve weighing multiple factors. Seeking advice from a qualified insurance broker or financial adviser can be a game-changer. They can help you navigate the market, explain policy details, and suggest cost-saving strategies that match your needs.
Insurance Isn't One-Size-Fits-All
Income protection insurance is not a one-size-fits-all product. It requires consideration of your unique financial needs, lifestyle, and risk factors. While there are many ways to lower premiums, the most important thing is to secure coverage that provides adequate protection should the unexpected happen. To explore your income protection options and learn more about other personal insurance types, visit Seek Cover's Personal Insurance page.
For those ready to start comparing policies or seeking personalised advice, you can begin your journey on our Get Started page.
The information in this article is general information only and is not intended as financial, medical, health, nutritional, tax, or other advice. It does not take into account any individual’s personal situation or needs. You should consider obtaining professional advice from a financial adviser and/or tax specialist, or medical or health practitioner, in relation to your own circumstances and before acting on this information.
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