Personal and business risk
What’s the first thing you think of insuring when you have a house, and probably a mortgage? The house right? Even the contents in the house. How about insuring ‘you’? The risk is mitigated with personal and/or business risk insurance (life, trauma, mortgage repayment/income protection insurance and so on).
As a whole, New Zealanders are underinsured. The old adage of “she will be right”, could simply be deemed another term for denial, or under acknowledging the true meaning of insurance. To put it simply, if we are to protect our assets and family, we can either self-insure, or buy suitable insurance. Most people do not have the ability to self-insure therefore the only sensible option is to rely on an insurance company to pay out, should things go wrong. Once it’s too late, it’s too late.
Here are some broad insurance statistics to consider:
- Medical conditions and illnesses account for 94% of deaths in New Zealand, or around 27,260 people
- Of all deaths, 65% or 19,000 are due to heart disease, cancer and stroke. Cancer is the leading cause with 8,750 deaths
- Of the 29,000 deaths only a mere 3% are sudden (accident, injury, unexpected or undiagnosed conditions)
- About 400,000 income earners in New Zealand are disabled for at least 3 months every year, during which time they will not be earning income unless they have some form of income protection insurance
- The causes of these disabilities are only 16% due to accidents and 84% due to medical conditions and illnesses for which there is no ACC cover
- A working couple in New Zealand has a one in three chance of having one of its members suffer a critical illness before the age of 65
As the statistics purport, you are far more likely to suffer an illness that disables you, or worse, than you are an injury that causes the same devastation.
How would you or your family cope if that something happened to you? By the time you need it, it’s too late. That is what insurance is: peace of mind that relevant insurance will be there to protect you when you need it the most. Just like you hope your house won’t burn down, and a claim needing to be made, the same is true when it comes to risk insurance.
The 4 step process I use
Step 1 – Identify your insurance objectives via a needs analysis
Step 2 – Prepare a personalised statement of advice once your needs are established, and discuss with you
Step 3 – Once you are satisfied we will implement your Protection Plan (I assist with the application form and liaising with the insurer to achieve the best-underwritten terms)
Step 4 – Provide ongoing service by way of annual reviews (there may be a need to review in-between times)
I can provide Financial Advice for the following products
- Life Insurance (and terminal illness)
- Trauma Insurance
- TPD (Total and Permanent disability)
- Mortgage Protection
- Income Protection
- Business Insurance
- Health/Medical Insurance
- ACC cover (in relation to CoverPlus Extra)*
*note as per the above statistics you are more likely to suffer disablement or death from an illness that an injury; there is a way to reduce your ACC cover in favour of purchasing private insurance. I can explain the benefits and risks of doing so as part of my advice process
Types of Insurance
Explained in plain English
In simple terms insurance helps us to get through an unexpected and unplanned traumatic event.
The following are typical personal insurance products:
Pays a lump sum for an agreed dollar amount. For example $500,000 in the event of death. It can be paid out up to 12 months earlier if a terminal illness is diagnosed and you are not likely to live for at least 12 months
Total and Permanent Disability Insurance (TPD)
This provides a lump sum in the event of a total and permanent disability through accident or illness. It is designed to provide a cash payment if you can never return to work due to a disability. Funds can be used (for example) to clear debt, provide ongoing income, or pay for expensive medical treatment. I always recommend ‘own occupation’ TPD
Trauma/Critical Illness Insurance
A lump sum is paid out in the case of a specified illness/trauma event. Common examples can include heart attack, stroke and cancer however the list is much longer. These are defined in policy documents are can vary between insurers. Although the incident may not be a life-threatening, you may be unable to work until you make a partial or full recovery. A lump sum is paid to help meet your financial obligations during the recovery period. This insurance is not required because you are necessarily going to die but rather because you are planning on living. The calculation of an appropriate amount of trauma insurance is purely arbitrary as the uses are many and varied. Proceeds may be used to repay debt, pay medical bills, hire home help, renovate the house, provide income, or even provide funds to take a holiday
Mortgage Protection Insurance
Mortgage Repayment Insurance pays a monthly benefit if you become injured or fall ill and you’re unable to work. The benefit is paid after your selected waiting period until you return to work, or until the end of your cover term. You can keep costs down by having a waiting period before payments are made and these personalised details are I will discuss with you. You may be entitled to a Partial Disability Benefit if you go back to work but are unable to work full-time. Mortgage repayment insurance is often referred to as the more superior ‘income protection’ policy, due to its lack of offsets against other income such as ACC. There are generally different payment term options such as two years, five years, to age 65 or even 70 in some cases.
Income Protection Insurance
Income Protection Insurance pays a monthly benefit if you become injured or fall ill and you’re unable to work. Income Protection Insurance allows you to focus on your recovery without worrying about your finances. If you get sick or injured and you’re unable to work for an extended period, Income Protection will cover up to 75% of your gross income. Income protection often works hand in hand with Mortgage Protection Insurance. As with mortgage protection you can also have a waiting period as well as different levels of cover and pay out terms such as two years, five years, to age 65 or even 70 in some cases
Our public health system provides a reasonable level of emergency care and treatment for serious medical conditions. However, waiting times for non-urgent medical conditions can often be lengthy, which can have a significant impact on health and the ability to earn an income. Health Insurance (or Medical Insurance) gives you fast access to the private medical care you and your family deserve, and a range of medication and treatments not subsidised by the government. There is often a specialist and tests option available as well with this type of insurance
If you would like competitive general insurance quotes and cover options explained, then I can refer you to a general insurance specialist. As part of the process, I will co-ordinate the interaction with this niche team I work with, so as to provide personalised service.
I can assist with brokering the following
- Home (residential and rural)
- Investment home (with landlords cover)
- Vehicle (including Motorbike)
- Business assets
- Business interruption
- Business liability insurance
- Business vehicle protection
One of the most common question these days I hear is “how do I work out my sum insured for my home”? Not only do you need to work this out these days, you are responsible for it. Getting it wrong can have major financial consequences.
You may wish to try the Cordell calculator to start with.
You could also have a QS (quantity surveyor) visit your home and provide a report for insurance purposes use.
I can recommend a QS if required.