But Isn’t The State My Safety Net?

Recently we had a client who said, “I don’t need income or mortgage protection because Work and Income will cover me.”

Do you need personal insurance or will the government help?

New Zealanders are fortunate to have State-owned safety nets like ACC and Work and Income if the worst happens and we find ourselves off work, but investigating how much we could expect to receive is a good reality-check. Unfortunately, few people do this until after they’re off work – and then realise how little they’re entitled to.

Work and Income has a ‘Check what you might get’ tool on its website (msd.govt.nz) that can help work out which benefits and payments you may be eligible for.  It asks a bunch of questions and at the end, tells you the payments you might be able to get and how to apply.  (The calculator is a guide only and what you’ll actually get is worked out once you’ve submitted an application.)

The benefits you’ll qualify for depend on your individual circumstances and there are lots of variables.  You’ll be asked things like your age, any health conditions, whether you have dependent children, if the children live with you full-time, whether you’re renting or a home-owner, how much you’re paying on your mortgage or rent and where you live.  You’ll also be asked whether you’re studying, your cash and non-cash assets, if you have a partner and how much they earn. 

It’s an interesting exercise, particularly if you’re weighing up whether you should take out mortgage or income protection insurance.

This is a complex area with many variables to consider but it’s well worth playing around with some different numbers and scenarios to see what you might be entitled to, based on your circumstances. 

An example of what financial help the goverment offers

Take Joe Average for example  Joe is thirty and his wife Jane is twenty-seven.  The Averages have two primary school-aged children and poor old Joe, the main breadwinner, is off work due to illness which he expects will last more than six months but not more than two years. He’s earning nothing and because he’s off work due to illness, he’s not covered by ACC.  Jane works part-time and earns $33,000 a year.  The Averages own their own home (with a mortgage) in Motueka and are paying $2,140 per month on it (basically all of Jane’s income).  They have $1,000 in the bank and no non-cash assets as their house and the car they use every day are excluded. 

When this article was written in Septement 2022, according to the Work and Income calculator, Joe won’t be eligible for any benefits through Work and Income although the Averages can apply for Working for Families Tax Credits of around $300 per week. Which is really not much for a family of 4 to live on.  

In 2023, the Government scrapped the idea of a new levy-based universal income insurance scheme which will be run through ACC.   

Can you really afford to rely on the State for your safety net?

If you’d like some advice on income protection or mortgage protection insurance, talk to the friendly team at Castle Trust.  Contact us.

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