A call to all Kiwi doctors, surgeons, dentists, specialists, and other health professionals that have some form of income protection.
Despite insurance products evolving in leaps and bounds over the last decade, we're frustrated with the lack of progression of income protection options for medical professionals.
What's typically recommended is often outdated and doesn't provide optimal cover for hardworking healthcare workers on the front line. Better options are being overlooked - or even worse, they're unavailable via some providers.
We'll compare the most commonly recommended income protection product known as personal indemnity income cover (Medical Assurance Society labels this as ‘Income Security Insurance’) with what we what we consider to be the superior income protection contract for health professionals. It's important to note the insured levels for the two different contracts are exactly the same yet they behave very differently when paying out alongside ACC.
The numbers.
Take Karla who’s a senior physician earning $250,000 per year – she’s taken out an Income Security Insurance policy with MAS and is supposed to be insured for $187,500 per annum. She has just dislocated her shoulder and fractured her wrist after a mountain biking accident and will need 3-months off work to fully recover. Unfortunately, she has found out the hard way her income cover entitlements are 100% offset with any ACC entitlements.
ACC CoverPlus with MAS ‘Income Security Insurance’ policy:
- ACC entitlement – maxed out at $109,235 per annum or $9,102 per month
- MAS Income Security Insurance entitlement – maxed out at $77,965 per annum or $6,497 per month
- Resulting in a monthly payment of $15,699
This is where is gets interesting. Had Karla been insured under a Loss of Earnings contact her total claim entitlement would have been considerably higher as it looks at the claimant’s actual loss of income.
ACC CoverPlus with Asteron ‘Loss of Earnings’ Insurance policy:
- ACC entitlement – maxed out at $109,235 per annum or $9,102 per month
- Asteron Loss of Earnings Insurance entitlement – maxed out at $105,573 per annum or $8,797 per month
- Resulting in a monthly payment of $17,899
**That’s a 14% difference or an extra $26,400 per annum while on claim.
Higher the income, the bigger shortfall.
Take Shae who’s an orthodontist earning $500,000 per year – he’s also taken out an Income Security Insurance policy with MAS and is insured for $330,000 per annum. He has just been involved in a snowboarding accident and has done serious damage to ligaments in his knee and will need 5-months off work to fully recover. Unfortunately, he has also found out the hard way his income cover entitlements are 100% offset with any ACC entitlements.
ACC CoverPlus with MAS ‘Income Security Insurance’ policy:
- ACC entitlement – maxed out at $109,235 per annum or $9,102 per month
- MAS Income Security Insurance entitlement – maxed out at $220,765 per annum or $18,397 per month
- Resulting in a monthly payment of $27,499
Again, the Loss of Earning contract yields far higher entitlements for an accident-related claim.
ACC CoverPlus with Asteron ‘Loss of Earnings’ Insurance policy:
- ACC entitlement – maxed out at $109,235 per annum or $9,102 per month
- Asteron Loss of Earnings Insurance entitlement – maxed out at $293,073 per annum or $24,422 per month
- Resulting in a monthly payment of $33,524
**That’s a 21% difference or an extra $72,300 per annum while on claim.
And the longer the claim, the greater the financial impact. For a 5-year claim period, this is a shortfall of $361,500, and we haven't even included inflation adjustments.
Other note worthy 'Loss of Earnings' features.
- You can add a specific injury benefit – this pays a lump sum with no wait period for a wide range of breaks and fractures
- You can add a serious illness benefit – this pays a lump sum with no wait period for serious illnesses
- The premium is generally considered tax-deductible or a business expense
Links to key resources below:
We know life, health, and income protection insurance products can create a lot of confusion. Please reach out to us here or give us a call if you’d to discuss your wealth protection needs with one of our qualified financial advisers.
This article is for informational purposes only and should not be considered as financial advice. It is always recommended to consult with a qualified financial professional before making any financial decisions based on your individual circumstances.
