Many New Zealanders are suddenly finding themselves worried about their finances and in these uncertain times cutting costs can make a lot of sense. While it is not a good time to cancel insurance, there are some things you can do to help manage the costs.
With so much uncertainty out there, insurance is one of the only certain things we hold, and this becomes an even more valuable asset in times like these.
Some insurance providers are also responding to this unprecedented crisis with changes to what is covered in some policies – which means the terms of any insurance policies you already have in place may be the best you will ever have. If you cancel policies now and intend to replace them at a later date, you may also find yourself with exclusions you don’t currently have. If you, or a family member, were to have a new health problem this could impact your ability to get coverage.
There are a number of mechanisms that you can use to adjust your premiums, and there are pros and cons to each. The best solution for you will depend on a number of factors, including your age, your financial situation and life stage. That is why we always recommend talking with your adviser, as they can work with you to find the best solution to suit your needs.
Some insurance providers allow you to take a premium holiday. This means that if you can show you are experiencing financial hardship, they may waive your premium for a period of time, during which time you are still able to make a claim.
It is important to note that this can only be done once in the lifetime of your policy.
A premium suspension gives a break from premiums for up to 12 months. During this time you cannot make a claim, but you can pick your policy up again with the same terms at the end of that period. As with the premium holiday, you can only do this once in the lifetime of your policy.
Some providers have added on criteria specific to COVID-19, with a 20% loss of income sufficient to prove financial hardship.
Reducing the sum insured will also reduce the premiums you need to pay.
This can be a good mechanism to use if you are younger, as there are built in special event increases in lots of policies that allow you to increase your amount insured in the future without further underwriting. These include things such as a marriage or civil union, birth or adoption of a child, taking out or increasing a mortgage, a child starting full-time tertiary study, an increase in salary or purchasing property. Read more here.
Increasing the excess on some insurance policies is an easy way to reduce the premiums, but if times are hard you need to be realistic about what excess you can afford in the event of a claim. It is also important to find out if you will be able to reduce the excess again in the future.
For policies, like income and mortgage protection, you can adjust the wait period before you start to receive a payout, which will impact your premiums.
Just because every loss, frustration and stressor of COVID-19 isn’t covered by insurance doesn’t mean nothing is. These are some of the ways you may be able to claim on policies.
It should be reassuring to know from a claims perspective it is business as usual (even if everyone is working from home).
Before you cut and cancel, or assume something isn’t covered, talk to your adviser. We want to work with our clients to get them through this. We really are all in this together.
Here are a few reviews from some of our existing clients around New Zealand