A Word (or two) About Income Protection Insurance

You might think ‘that will never happen to me’ but the harsh reality is, sometimes it does.  One day you can be fully functioning and working full time … and the next day you’re not able to.  And unless you have other options up your sleeve, you could find yourself at the mercy of WINZ and their systemised, heartless approach to dealing with people with disabilities.

Thankfully my own WINZ experience was temporary.  Maybe I got sucked in by the TV commercials saturating Australian television promising “peace of mind in times of uncertainty and stress” or possibly I experienced an uncharacteristic attack of astute financial foresight.  Either way, at the age of 51, I decided it would be prudent to take out Income Protection Insurance.

After spending minimal effort on any meaningful research, I selected a broker and duly set about completing the application form.  At the time I was living and working in Australia and although I had no particular health issues, I dismally noted my family’s propensity to various types of cancer and wondered if this was going to be a wholesale waste of money given that any claim incorporating the merest hint of the C word would doubtless be rejected.  Besides that, once you pass the half century mark you’re not likely to come out on the winning side once you’ve had your medical records scrutinized by an enthusiastic assessor pursuing that holy grail of insurance KPIs:  A Pre-existing Condition.

Despite this, I went ahead with the policy and kept it going after I returned to New Zealand permanently in 2013, adjusting the monthly benefit amount so that it was in line with my lower New Zealand earnings.  In fact I had to keep adjusting it on a yearly basis as the insurer was clearly labouring under a misguided fantasy that I was actually fortunate enough to be receiving annual pay increases and their premiums would rise accordingly.  Although they try to advise you not to decrease it, it’s foolish to be paying for more than you’re earning  since you can’t claim more than the loss resulting from the situation and financial evidence of your earnings for the previous year is required at claim time.

In this regard I was somewhat unlucky when claim time came for me after receiving the news in September 2016 that I had multiple sclerosis.  I had been experiencing vague indications of the disease for nearly four years but thought it was just a ‘bad back’ coupled with fatigue associated with menopause.  By June 2015 my symptoms had deteriorated leading me to undergo fairly major spinal surgery after which followed a period of recuperation.  It was during this recovery time that I was made redundant from my position at work, just a year prior to my diagnosis.  As with all standard income protection policies, none cover job redundancy, only disability caused by an accident or illness.  Redundancy Protection could have been added at an additional cost, however the cost was significant and I had just opted for the standard policy.

In October 2015, I had to apply to WINZ for a Jobseeker benefit and what I received on that wasn’t able taken into account as ‘earnings’ when calculating the monthly benefit of my income protection claim.  The closer that Christmas 2015 came, the less likely I was of securing employment other than a small amount of temporary and contract work, and it wasn’t until February 2016 that I finally secured a full time position.  This meant that my earnings for the 12 months prior to my disability were down by nearly four months’ worth of full time earnings, which in turn meant that my income protection claim would be adjusted accordingly.

On the extremely fortunate side of the equation though, I had fortuitously and without knowledge aforethought, chosen AIA as my insurer.  AIA cover multiple sclerosis in their income protection policy whereas many insurers will not.  I have absolutely no family history of multiple sclerosis and nor was I experiencing any symptoms at the time of taking out my policy, so I certainly wasn’t investigating the ‘MS friendly’ insurers.  I can only assume that the lack of cover for Multiple Sclerosis is that it generally affects people over a long period of time and for people with the relapsing/remitting variety, its symptoms can be sporadic.

There was also yet another potential fish hook with this policy.  I had taken out the income protection cover in 2011 when I was living and working in Australia and intending to live there permanently.   When I was living in Australia (like all New Zealand migrants), I had a temporary visa or special category visa unique to New Zealand citizens therefore, although I could live in Australia indefinitely, I didn’t have permanent resident status.  For some income protection insurers, having permanent residency is a must in the event of a claim so that even if I were still living in Australia, I would still not be able to claim (as many New Zealanders have found to their cost).  Again, by sheer good fortune and without my having done any advanced research, AIA claims are not dependent on this.

In the face of my negative expectation that I would meet the criteria required to qualify for a cracker out of this income protection policy, I contacted my broker in Australia who turned out to be incredibly helpful.  I duly filled out the multitudinous forms, complete with financial statements and lists of doctors, specialists etc that I’d visited over the past three years.  The final lodgement form comprised nearly fifty pages of information relating to my claim.  It would almost be enough to put some people off claiming altogether, particularly those coping with a distressing diagnosis that may affect their cognitive abilities.  Having said that, it was a huge improvement on the rigmarole you have to go through with WINZ and for a much less generous reward.

As with most income protection policies, there is a waiting period, the length of which is normally determined by the amount of monthly premium you’re willing to pay. In my case, I had a period of four months where I had to rely on a WINZ benefit supplemented by some fairly sporadic work, which again was over the Christmas/New Year period, so needless to say it wasn’t much.

The New Year brought mixed blessings.  I had developed a pressure wound on the heel of my foot which had exacerbated my MS symptoms and affected my mobility to the extent where I had now come to the realisation that I was going to have to move house.  There were slippery slopes and accessibility issues where I was living, however it was cheaper than anything else I was likely to get and there are always costs associated with moving.

The story does however have a fortunate ending.  Just prior to my admission to Burwood Hospital where I spent eight days in respite/recovery for the pressure wound in early February 2017, I received the news from AIA that my claim for partial disability had been approved.  Whilst I was in hospital, work from my amazing and very understanding employers had increased and the day I was discharged from hospital, I viewed a property that was perfect for my needs.  My wonderful friends helped me to move house and a couple of weeks after my discharge I was assessed for driving and passed with flying colours.  But best of all, I was at last able to kick WINZ into touch.

Don’t get me wrong, it’s not the people at WINZ, they were always compassionate and helpful, it was that whole inhumane bureaucracy behind the WINZ machine that I found so depressing.   Always sending totally inappropriate computer generated letters to people with disabilities who can’t possibly comply with their demands and always over you like a rash whenever your earnings slightly exceeded their weekly Jobseeker benefit amount, even though you were never a ‘Jobseeker’ in the first place.

Surely it must be possible to filter a database so that people with genuine disabilities don’t receive this never-ending stream of inappropriate and distressing correspondence?  It wasn’t as though I’d made a ‘lifestyle choice’ to go on a benefit.  Why would I?  After rent and direct expenses relating to my disability were deducted, I was left with $45.00 a week for food, electricity, phone etc.  That’s a fiscally fraught juggling act even when you’re not disabled.

I’ve got to admit that there were times, particularly after my redundancy when I struggled to pay some of those premiums but I’m so glad now that I did.  I urge everyone to think seriously about getting income protection insurance … I was lucky but best to do your research first.