Income Protection – Do you know what Benefit Payment Period means?

Income Protection insurance pays out should you become disabled or critically ill. Most people take it out to protect their loved ones should anything serious happen to them. Mortgage Repayment Insurance works in a similar way.

Saying that these types of insurances are complex is a bit of an understatement. This complexity comes from the different types of Income Protection and Mortgage Repayment Insurance policies available, the way your income is calculated, the reasons you can claim on it and how it will pay out. There are also several ways in which payments are taxed.

It is important to understand in which cases you could make a claim on it and whether it will be offset by ACC payments when you take out a policy. For example, unless you've added the redundancy benefit to your insurance you will not be able to claim if you lose your job. Click here to find out more about redundancy cover.

One of the key things you need to decide on when taking out a new policy is the benefit period. Do you understand what this means and why it is important?

Understanding benefit periods

The benefit period you choose for your policy determines the length of time you will be paid for if your claim is accepted. A benefit period can be either a time span, such as 2 years, 5 years, or a certain age, such as payable to age 65.

Here are some things to keep in mind when deciding which benefit period to choose:

  • Longer benefit periods typically have higher premiums – the insurance company will be paying you for longer, so they are calculating this expense in your premium
  • If you are not on a tight budget you may want to consider a longer benefit period to ensure you are covered in the event of a long-term disability
  • You can complement your Income Protection and Mortgage Repayment Insurance policies with other insurances – like life insurance, critical illness insurance and total permanent disablement insurance - to make sure you are covered for everything you need to, yet paying the right price for it


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