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When life changes, make sure your insurance does too!

Change is the only constant in life, and as we move through life events and milestones we adjust and keep moving forward. But have you given any thought as to how changes in your life impact your insurance covers, and when you need to make changes?

At Plus4 it is important to us that you have the right insurance at the right level for each life stage – this includes making sure you are not over insured or paying for cover you won’t be able to use. To this end, we send out a letter every year to touch base with our clients to make sure their cover is still meeting their needs, but you don’t need to wait for the reminder.

What life changes should trigger an insurance review?

These are the changes we see most commonly; however it isn’t an exhaustive list – which is why it is always key to speak with your adviser to discuss if a recent change is a reason to adjust your type or level of cover.

Mortgage

Have you increased or decreased your mortgage? Your mortgage is often a starting point for deciding how much life or income cover you need, so if you have dramatically reduced your mortgage or had an increase it is time for a review with your adviser.

Relationship change

If you have a new relationship, or have ended a relationship, there are a number of ways this can impact your insurance covers. For example – who owns your life policy? Is the person that will be receiving the pay out still appropriate?

Increase or decrease in dependents

If your teenager has left home, a new baby has arrived or a dependent parent has moved in these are all worth discussing with your adviser, to review whether your cover should be increased, reduced or structured differently.

Employment

If you move into a dramatically different occupation it is worth touching base with your adviser to see how this may impact your covers and premiums. Likewise if you become self-employed, or become an employee after self-employment the types of policies you have and the way they are structured are going to need a review.

A change in income

If you have income protection, your premiums and pay out are based on your income, so a significant change means a discussion with your adviser is essential to make sure you aren’t disappointed should you need to claim.

A reduction in income may also mean you are struggling to pay the premiums and it can be tempting to cancel policies. Taking the time to discuss this with your adviser means you can work to find a solution so you can still have some cover in place.

Special events increase

Making changes to keep your cover up to date doesn’t need to be arduous. Most life insurance policies have a built-in ‘special events’ increase which means you can increase your existing cover, without further medical underwriting. The specifics vary between providers which is why it is important to discuss with your adviser, and discuss your future plans when you first get your cover in place.

Some providers also give you the opportunity to increase your cover on certain policy anniversaries or allow you to purchase a future insurability option, which allows further increases to cover each year without further assessment (up to certain limits).

Need to discuss whether your cover is still best meeting your needs? Call one of our advisers today.

When should you change your insurance

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Is insurance only for those in paid work?

Does someone not earning an income need personal insurance cover? We believe they do.

Your ability to earn an income is your greatest asset, and as such should be well insured. However, in certain of periods of life there may be a spouse who is not in paid employment – this doesn’t mean they can’t or shouldn’t have insurance.

Why both spouses need personal insurance cover

While unpaid work is often undervalued it contributes enormously to a household in different ways, and the very real financial ramifications of a non-working spouse being taken out of action are only one part of the picture.

Let’s look at a fictional couple, Vic and Kelly, in their late thirties with three school aged children. Vic works fulltime and Kelly works part time as a teacher aide, so she can be home after school and in the school holidays.

To understand why Kelly should have cover, even though she is on a low income, let’s imagine what would happen if she was diagnosed with cancer.

  • Vic will have to take time off from work

If it is terminal cancer he is going to want to spend as much time as possible with Kelly and the children. If it isn’t a terminal illness, life will be turned upside down with treatments for at least a year. Depending on where they live these treatments may be a considerable distance from home.

Vic will need to take time off work to care for his wife and even when he can work, he may need to reduce his hours to care for the children when they are out of school. He has income protection, but it only covers him being unable to work if something happening to him, not his spouse.

So right away the family has lost or reduced their income at a time when they are going through some major stress.

  • Covering Kelly’s unpaid labour

If Vic is going to be looking after Kelly, who is looking after the children?

We had a client muse that they needed more cover for the stay-at-home wife than the self-employed husband as he would need to employ a nanny, cook, cleaner, PA and accountant to cover her absence.

Jokes aside, it is important to have a thorough discussion about the ramifications of the primary caregiver being out of action, and looking at different scenarios. Family and friends may be able to provide some support but, depending on your circumstances, you may need to look at paying someone to help.

  • Unexpected additional costs

Luckily for the family, in New Zealand the medical treatment is free. However, supporting Kelly through this time and caring for the family’s needs can throw up some new expenses – at a time when the household income has already been reduced.

This could include accommodation and travel if treatment is far from home and after school care or school holiday programs for the children. Kelly’s treatment will make her immune system vulnerable – if one of the children comes home from school with a virus she may need to go and stay in a hotel.

Added to the emotional trauma of the illness itself, this financial stress could make life much more difficult for the family.

So how do you mitigate the risk?

The easiest and most cost-effective way to cover someone who does not have an income, or has a low income, is by bolstering their trauma cover. While children are automatically covered on most trauma policies spouses are not, so each must have their own.

Trauma protection is a personal cover providing a lump sum payment in the event of a diagnosis of certain illnesses or if you experience specified injuries. Different providers have slightly different lists of illnesses or injuries, but all include cancer, heart attack and stroke. Injuries can include head trauma, burns or time spent in intensive care.

One of the benefits of trauma protection is you can use the lump sum pay-out however you see fit – such as reducing debt, covering living expenses, paying for alternative treatments or a holiday to recuperate.

You may be surprised at how little it can cost – $100,000 of trauma cover for our fictional Kelly would be less than $20 a month.

Talking to an adviser about your current life stage is the best way to make sure your family has the best level of cover you can afford when you need it. Take the time to discuss how much income each spouse would need if the other was unwell, or no longer around.

There are some income protection policies that include cover for a dependent relative, which is another good reason to talk to your adviser when choosing the cover that is right for you.

Need to talk about protecting your family? Call one of our advisers.

Insurance for spouse

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Do children need health insurance?

With GP visits free to children under 14 years old, getting medical cover for your healthy, active children may seem unnecessary.

We think it is worth considering, and there are a number of reasons why.

In our previous blog on health insurance (you can read it here) we described health insurance as doing something your future self will thank you for. The same concept stands for insuring your children – you are setting them up for later in life, in a time when our public health system may look very different to what it does today.

Protection against pre-existing conditions

One of the problems adults find when they go to get health insurance is the limits placed on them by pre-existing conditions. A pre-existing condition is a health problem that exists before you apply for a policy – insurance companies are businesses and as such they are concerned about their bottom line. This means if you have a pre-existing condition they are likely to exclude cover for that condition, charge a higher premium or impose a waiting period before that condition is covered.

If you insure your children while they are young, fit and healthy, and they keep the policy when they reach 18 or 21 (depending on the insurer), they will not have any pre-existing conditions as the cover is already in place. This includes big stuff such as cancer or heart problems, but also smaller things such as allergies or asthma.

Pre-existing vs Congenital: An important distinction to be aware of

It is important to understand the distinction between pre-existing conditions and congenital conditions as most insurance policies do not cover congenital conditions.

A congenital condition is something that you are born with, whereas a pre-existing condition is something that you have developed since birth. For example, a tongue-tie correction needed on a baby will generally not be covered, as that is something they were born with. A child that needs grommets inserted (one of the most common procedures for children, which helps prevent persistent ear infections but often has long waiting lists) can be covered.

Access to healthcare, no matter how public funding changes

With New Zealand’s aging demographics the way we are able to access public healthcare may well change in the future. The government currently spends 20% of its budget on healthcare and we have 10 workers (i.e. paying tax to fund the government budget) for every old age dependent, however in the next 20 years that number is going to shift to four workers for every old age dependent. That future healthcare burden raises some questions around the sustainability of our public system.

While we don’t know exactly what the future looks like, it is likely that private medical insurance will play more of a role in getting the healthcare you need when you need it.

Want to talk to someone about insurance for your family?

If you need some help weighing up the pros and cons of having medical insurance for your children, get in touch with one of our advisers today. They can talk you through some of the ins and outs of the policies available and help you find one that best suits your family’s needs.

Do children need health insurance

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Getting the most from your income protection

Income protection insurance is one of the most important insurance covers you can have. As we have said before, your ability to earn an income is your greatest asset.

Many income protection policies also come with add-ons. These vary between providers – some are included in the policy, whereas others carry an additional premium. To make sure you are getting the most from your income protection policy, it is worth knowing what add-ons are available.

Dependent Caregiver/Relative Benefit

When you take out income protection, you are insuring your ability to earn an income. While it is obvious that this is dependant on your health and wellbeing, none of us exist in isolation. Having a relative suddenly needing care can impact your ability to work.

This is where the Dependent Caregiver Option comes in. As an example, the Partners Life policy will pay out six months of your cover if you need to care for a parent, child, sibling, grandparent, grandchild, mother-in-law, father-in-law, spouse, de facto partner or civil union partner.

There are restrictions and differences between providers, which is why it is always best to speak with your adviser to find the policy that best suits your needs.

Retirement Protection

Income protection covers you until you are 65 years old, which is great for an income throughout your working life. However, if you start to claim relatively early in your working life, what happens after you reach the age of 65?

If you choose the Retirement Protection Option add-on, you can choose to have 2 percent, 4 percent or 6 percent of your pay-out contributed directly to your Kiwisaver fund. It could mean your retirement savings do not languish when you are unable to work.

Inflation Protection

If your income protection claim covers a long period of time, you will need to protect your pay-out from inflation. While $5,000 a month may be fine right now, it may not be sufficient in 20 years.

Including inflation protection in your policy means the pay-out will rise in line with the CPI adjustment for inflation.

Payment Term Restriction Option

Some providers will include a restriction on mental health or certain physical conditions. For example, Partners Life has a Mental Health Restriction and Fidelity Life offers a Spine or Mental Disorder Restriction.

These are common conditions that are claimed on income protection, so if you opt in to a restriction you can save on your premium. If you were a Fidelity Life client and you opted in to the restriction, you would only get two years paid out on a spine or mental health claim – but you would save 20 percent on your premium.

Booster Option

If you include the booster option when setting up your cover, you can boost the benefit by 30 percent for the first three months of the pay-out. Most claims are completed in 3 to 6 months, so this is a great option to get more from your pay-out when you do claim.

Specific Injury Benefit

Many income protection policies have a list of specific injuries and illnesses that they will pay a certain amount of your policy before the waiting period is up. These can include (but are not limited to) fractures, loss of a digit or limb, organ failure or burns.

Again, it is important that you know what your policy covers so you can get the most from it should something happen.

How long should you keep your income protection policy?

Income protection is one of the most expensive covers, which means when expenses are cut back it can be the first to go. Recent research by Asteron showed that the average age of income protection claims was 47 years old, and the average age of cancellation was 46 years old.

Working with your adviser, who knows the providers and policies in great detail, means you can work out how to reduce your premiums while maintaining some cover. You will find there are different things you want from your policy in your 30s compared to your 50s.

There are also benefits built in to income protection cover (more than we are able to list here) that may mean you can reduce your other insurances instead, while maintaining income protection cover.

If you want to know more about income protection and the benefits and add-ons available, contact one of our advisers.

Confident financial planner talking to couple

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Do children need insurance?

When putting insurance policies in place, the first point of reference is always the breadwinner. However, it is so important to realise that none of us stand in isolation and that something happening to any member of your family is going to have a financial impact – including your children.

We explain why it could be sensible to consider trauma cover, health insurance and life insurance for your children.

Trauma Cover

Trauma cover pays out a lump sum payment in the event of a diagnosis of certain illnesses or specified injuries (more about trauma cover here.) The main advantage of trauma cover is that the lump sum payment frees you up to spend time with your family and potentially cover some medical costs.

Another advantage is if you have a trauma policy with certain providers, your dependant children are automatically covered.

Looking at Partners Life as an example, their policy provides trauma cover of $50,000 to dependent children, regardless of the parent’s sum insured (note, this doesn’t cover congenital conditions). The children can also keep the policy cover when they become independent. To receive this cover, children don’t need to be listed on the policy, and Partners Life don’t charge a premium for their inclusion.

This is a huge benefit of this provider’s trauma policy for parents of dependent children, and a real example of the value of working with an adviser who understands your family situation.

There are a number of providers that include trauma coverage for children in their policies, to varying degrees, so make sure you speak with your adviser to find the right one for you.

Health Insurance

With GP visits free to children under 13, getting medical cover for your healthy, active children may seem unnecessary. There are a few important reasons we think it is worth considering.

There are two key ways to look at health insurance for children; caring for them now, and thinking about the future.

The main advantage of health insurance for children while they are young is the quick access to specialist services and expertise, without the stress of having to go on a waiting list.

It also offers an advantage as your children grow. Getting health insurance for your children now means you are setting them up for later in life. With an aging population placing more and more pressure on our health systems, public medical care may look very different in the future.

When applying for insurance as an adult many people also find limits placed on their coverage by pre-existing conditions.

If you insure your children while they are young, fit and healthy, and they keep the policy when they reach 18 or 21 years old (depending on the insurer), they will not have any pre-existing conditions as the cover is already in place. This includes any major conditions or illnesses such as cancer or heart problems, but also smaller things such as allergies or asthma.

Life Insurance

Life insurance for children is something that no parent ever wants to think about, but it is worth discussing.

It is uncommon to get life insurance for children, but it is available. How much you can insure children for is very limited but is generally enough to cover funeral costs.

The reason it is worth considering is that insured children can take over the policy when they come of age and will have that cover in place. To increase the cover, they will need to go through the normal application process, but they are assured of the original cover, regardless of any medical conditions that have developed since they were originally insured.

Congenital Conditions

A last note to keep in mind is that most insurance policies don’t cover congenital conditions.

A congenital condition is something that you are born with, whereas a pre-existing condition is something that you have developed since birth. For example, a tongue-tie correction needed on a baby will generally not be covered, as that is something they were born with. A child that needs grommets inserted (one of the most common procedures for children, which helps prevent persistent ear infections, but often has long waiting lists at public hospitals) can be covered.

If you want to know more about the options for insurance cover for children, or check how your current policies provide for your family, get in touch with one of our advisers.

Should you insure your children

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Why you need a will, and how to write one

Everyone knows that having a will is really important, but it can seem overwhelming and hard to start the process of creating it.

Like having life insurance, health insurance and trauma insurance, the benefits of a will are easy to appreciate. It is all about looking after the people we care about should something happen to us. It also makes things easier by ensuring both your assets and any taonga are allocated as you wish, and without any unnecessary delay.

How to write a will

If you don’t have a will we strongly recommend getting one in place as soon as you can. There are a number of ways you can go about this.

  • Visit a lawyer
    Most lawyers create wills for their clients but, as they are charging by the hour, this can be an expensive process.
  • Trusts
    Many trusts, like Public Trust, will offer to help you write your will for free. This can be a great service, as they do they really know their stuff. But, be aware that they can come with a heavy administration fee – so make sure you know all the details first.
  • Do-it-yourself
    There are a number of DIY options, from booklet style kits to online templates. If your will is likely to be straightforward, one easy and legally sound option is the online tool My Bucket List, developed by New Zealand lawyer Mai Chen.

At Plus4 Insurance Solutions, we provide our clients with a template they can use to help them identify what they want their will to include. There are two good reasons to use this template. Firstly, you can go over it in detail in the privacy of your own home and hash out the details. Secondly, once you have done that you can then take it to a lawyer. As you have already done most of the decision making, it will save you time (and therefore money) on legal fees.

What you should consider

Before you write your will, there are a few issues to understand and consider. While it can be unpleasant to deeply consider the consequences of our own passing, it is important to remember that your will is not for you, but for the people you love.

  • Beneficiaries. There are two types of beneficiaries – primary and contingent. The primary beneficiary is your first choice to inherit your estate, such as your spouse. The contingent beneficiary is the next option, if the primary beneficiary has died or cannot be located, such as your children or a sibling.
  • Bequests. A bequest is a gift given in a will. This could be a sum of money donated to a favourite charity, or to a person who is not a beneficiary of the will. It could also be an item, such as jewellery or heirlooms, you wish to be given to a specific person.
  • Guardianship. Deciding who gets your grandmother’s piano is far easier than choosing who will care for your children in your absence. You can appoint someone in your will to take over guardianship, if your children are under 18 years of age. This person is a testamentary guardian. It is important to note their role doesn’t include the day-to-day care of the child, or children, but they can make major decisions about how they are brought up, and by who.
  • Financial planning. If you are responsible enough to be making a will, we hope you also have life insurance in place. In setting up your insurance you need to consider various scenarios and where this money would end up. For example, if you have given someone guardianship of your children – how will you fund that?

If you want to discuss your life insurance, or would like a copy of our will template, contact one of our advisers today.

Why you should have a will

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Should you get health cover for your children?

With GP visits free to children under 13, getting medical cover for your healthy, active children may seem unnecessary.

There are a number of reasons we think it is worth considering.

In our previous blog on health insurance (you can read it here) we described health insurance as doing something your future self will thank you for. The same concept stands for insuring your children – you are setting them up for later in life, in a time when our public health system may look very different to what it does today.

Protection against pre-existing conditions

One of the problems adults find when they go to get health insurance is the limits placed on them by pre-existing conditions. A pre-existing condition is a health problem that exists before you apply for a policy – insurance companies are businesses and as such they are concerned about their bottom line. This means if you have a pre-existing condition they are likely to exclude cover for that condition, charge a higher premium or impose a waiting period before that condition is covered.

If you insure your children while they are young, fit and healthy, and they keep the policy when they reach 18 or 21 (depending on the insurer), they will not have any pre-existing conditions as the cover is already in place. This includes big stuff such as cancer or heart problems, but also smaller things such as allergies or asthma.

Pre-existing vs Congenital: An important distinction to be aware of

It is important to understand the distinction between pre-existing conditions and congenital conditions as most insurance policies do not cover congenital conditions.

A congenital condition is something that you are born with, whereas a pre-existing condition is something that you have developed since birth. For example, a tongue-tie correction needed on a baby will generally not be covered, as that is something they were born with. A child that needs grommets inserted (one of the most common procedures for children, which helps prevent persistent ear infections but often has long waiting lists) can be covered.

Access to healthcare, no matter how public funding changes

With New Zealand’s aging demographics the way we are able to access public healthcare may well change in the future. The government currently spends 20% of its budget on healthcare and we have 10 workers (i.e. paying tax to fund the government budget) for every old age dependent, however in the next 20 years that number is going to shift to four workers for every old age dependent. That future healthcare burden raises some questions around the sustainability of our public system.

While we don’t know exactly what the future looks like, it is likely that private medical insurance will play more of a role in getting the healthcare you need when you need it.

Want to talk to someone about insurance for your family?

If you need some help weighing up the pros and cons of having medical insurance for your children, get in touch with one of our brokers today. They can talk you through some of the ins and outs of the policies available and help you find one that best suits your family’s needs.

do childen need health insurance

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