AT WHAT COST?

There’s a big difference between health insurance and income protection – which should you spend your money on?

With the New Year under way, it’s a good time to ensure you have everything in place behind the scenes, so that you can focus on running your business. There are a number of aspects to consider, but one important and often overlooked consideration is what support you have in place if you need time off the tools due to illness or injury.

This is where health insurance and income protection insurance can help. Knowing the difference between the two, however, is key. It’s not uncommon for people to confuse these two types of insurance and think that they offer similar cover. But they don’t!

Income protection

Provides regular monthly payments to replace your income, if you’re unable to work due to illness or injury.

Doesn’t ACC do that?

ACC does a similar thing, but for accidents only. Income protection covers both accident and illness, including mental health. Since even builders are more likely to be off work through illness than accidental injury, income protection is often a better option than just relying on ACC.

Self-employed people can also dial down their ACC cover and put the saving towards income protection insurance, getting broader cover, often for a similar total cost. There are pros and cons to this arrangement, which is why we advocate discussing your situation with an independent financial adviser, who can make a recommendation that best suits your needs.

Health insurance

Covers the cost of treatment for a health or medical issue.

Doesn’t our public health system do that?

Yes it does. However, health insurance can help you get faster access to treatment through the private system. It can also reduce the cost of private treatment for certain conditions.

Health insurance will not pay to replace your income during any period that you’re off work recovering from an accident, illness, surgery or medical procedure, or if you’re unable to work while undergoing treatment.

So, what should I do?

As both types of insurance provide different cover, you may want to have them both.

If you only have income protection, you must rely on the public health system for treatment if you get sick; however, you would receive regular payments to replace your income until you could return to work.

If you only have health insurance and you get sick, then you may receive treatment sooner but would need to rely on disability income support from WINZ (currently just over $60 a week) if you were unable to work and had no other sources of income.

You could also opt for a combination. For example, taking income protection for yourself but putting health insurance in place for the kids.

Ultimately, speaking to an experienced adviser before you make this decision is the right way to go.

Builtin Insurance is New Zealand’s trade insurance expert. For more information and to request your own review visit builtininsurance.co.nz or contact Dave La Pere at dave.lapere@builtin.co.nz or 0800 BUILTIN.