Loss of Income can spell financial disaster for our household. Think for a moment about COVID-19 and how that has affected most Kiwis because most of us simply do not have the financial reserves to meet our financial commitments if our income stops. Maybe you’ve been affected recently and know what it is like to experience a loss of income.
Fortunately, there has been some Government assistance for employees and self-employed, and if it were not for that, your financial situation could be much worse. Your employer would have received income from the Government to help pay your wages, and if you are self-employed you may have received a payment directly into your account.
Loss of Income insurance works in a similar way, except you have to be unable to work due to sickness or accident. Think about how you felt when you were paid money into your account, the sense of relief knowing you can meet your household expenses this month. What if it were not COVID-19 and you could not work because you had some other sickness? There would be no ACC, and most likely no Government assistance at all, so you would have to live on your reserves (yeah right!)
How Long Could You Last?
Let’s say, for example, it was not COVID-19 that stopped you from working and it was some other sickness. How long could you keep your household (or business) going before you ran out of money? 4 weeks? 8 weeks? 1 week! What’s your plan after your reserves run out? If you think finances are tight right now, imagine no Government assistance at all.
What you need to do is have a plan on how you are going to run your household if your income stops. Let’s look at your options for keeping your household running if you experienced a loss of income.
- Use your savings (if any)
- Help from other family members. Is that really an option, try and ask them for help now and most would not be in a position to help you.
- Loans and Credit Cards which can work for a short term, but it is digging a big hole to jump into.
- Sell an asset to finance your household which may be an option, but what type of asset do you have to sell that could do this.
- Loss of Income insurance which may work out to be the cheapest option instead of borrowing from banks and finance companies.
Protect yourself from loss of income
You can replace lost income if you are unable to work due to sickness and/or accident. You have options, you could;
- Insure a per cent of your income or;
- Just your mortgage repayments or;
- Maybe just your household expenses including rent
You can protect yourself and it does not have to cost a fortune, and you don’t have to insure for the Taj Mahal! We will give you the right advice, and create a plan that meets your budget and needs so Contact Us today.