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Keeping your insurance cover in financially unsettled times

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.

Why you should keep the policies you have

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.

How you can reduce your insurance premiums

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.

Premium Holiday

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. 

Premium Suspension

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.

Reduce sum insured

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.

Increase excess

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.

Increase wait time

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.

How is Covid-19 covered?

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.

  • Life cover: If you have life insurance there are no changes to what is covered – this means if life cover is already in place and the insured person dies from COVID-19, they are still covered
  • ICU benefit: Some people who contract COVID-19 may spend some time in intensive care. Most trauma policies include ICU cover, which is triggered after a certain number of days in intensive care, regardless of the cause
  • Chronic lung failure: Some long term health impacts of COVID-19 could be covered by trauma insurance
  • Income protection: If you became unwell and were off work for an extended period this could be covered under your income and mortgage protection policies
  • Redundancy: Some income protection policies have redundancy cover

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.

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Meeting an adviser? How to get the most out of your meeting

When you work with an adviser to get the right insurance in place, we want it to be as easy and accessible as possible. This might mean we come to your place after hours, or that you come to our office – part of what makes working with an adviser so great is our flexibility. If you want to know how to prepare for meeting an insurance adviser there are a few things you can do to get the most out of the meeting, whether you are looking for life insurance, income insurance, trauma protection or just some good insurance advice.

Allow enough time

If you know exactly what you want, half an hour may be okay. However if you are using an adviser because you want to draw on their expertise and experience, you need to allow enough time to for them to get a good understanding of your current situation and how you see your life changing in the future. It is best if neither party feels rushed.

Be open with your disclosure

Disclosure is a key part of making sure we choose the right policy and making sure you really are covered when you come to claim.

Don’t hold back because you are concerned you won’t get cover – chances are it would come out when you try to make a claim and it could be denied. There are lots of different providers and policies available, and when we know the full picture we can choose the best provider, policy or combination of policies to get the most comprehensive cover for your circumstances.

Give us your full attention

Life is busy – and it can be hard to fit everything in. However, if we have a meeting together you need to be able to give us your full attention. You may find insurance boring, but it is important!

This means make sure the kids are in bed, turn the TV off, and put your phone on silent. This is a professional meeting, and even if it is at your kitchen table it needs to be treated as such – otherwise you may miss key information or forget to tell us something critical.

Be prepared

There are a few things you can have ready before we arrive. If you have existing policies, have those details ready for us. Having your personal income details or business accounts ready is good, as is a clear idea of your own medical history and that of your family.

Ask lots of questions

We absolutely love it when you ask questions and are open to learning more! This gives us a great idea of what you already know and what is important to you. We know our stuff inside and out, but we don’t expect you to, so there really are no dumb questions.

Make sure you can both be there

Whether you are getting insurance along with your partner in life or your partner in business, it makes sense for you both to be available, especially for our initial meeting. We need to know what is important to both of you, and we need to know about you as individuals.

After the meeting

After we have met with you, we may need more information or official documentation. Following up on this promptly and partnering with us to chase up third parties, such as your doctor, makes a big difference to how quickly we can get your cover in place.

Relax, we are a team

Lastly, remember that your adviser is on your side.

We are not there to sell you something you don’t want or need, we are there to work with you to put together a plan for your future. It is not about a particular insurance product, it is about the outcome for you if something goes wrong, and insurance is just one of the tools we use to get the best outcome for you. That is why we will likely talk to you about wills, trusts and enduring power of attorney as well.

Are you ready to get an insurance adviser on your team? Get in touch with one of our advisers today.

Prepare for your meeting with an adviser

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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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What should you do when income protection premiums rise?

With the nature of insurance underwriting and risk trends, as you get older your insurance premiums will rise. This is as true for income protection as any other type of insurance, but has the added complication of the cover  automatically being cancelled when you reach age 65*.

So when you are in your early 60s and nearing retirement, your premiums are rising and your  pay-out period is increasingly limited, what do you do?

It can be tempting to cancel the cover and hope for the best, reduce your sum insured, or extend your wait period (the period before the cover starts to pay-out, usually 4, 8, 13 or 26 weeks), however this may not be your best option.

What are the issues?

If you are paying higher premiums but have extended your wait period or reduced your sum insured the value you get back in a claim continues to diminish.

If you are unable to work because of an accident you will be covered by ACC, regardless of your Income Protection sum insured or stand down period. This tends to mean that Income Protection can sometimes be redundant when ACC cover is helping, because most Income Protection policies are subject to offsets.

However, if you are unable to work because of an illness, this is where Income Cover helps – but you will only get a pay-out if you are off longer than your wait period – if that is four weeks and you are off work for five weeks you may only get one week paid out. So in a scenario where you are having to extend the wait period to keep premiums down, and are having to consider eight or 13 weeks before receiving benefits, alternative options can be considered.

In these scenarios, consider this: Given that ACC is there for accidents, your Income Cover becomes more about covering illnesses. If you have a long wait period such as 13 weeks, then the Income Cover only becomes effective in scenarios where an illness takes you out of action for more than three months. In most cases (although not all), these illnesses are likely to be conditions that are covered by trauma cover, such as cancer, heart attacks, strokes and so on.

How trauma cover can create a solution

For clients in this position we often recommend they consider trauma cover.

There are a number of reasons for this:

  • The entry rate of the premiums is lower
  • The pay-out is paid on the basis of a diagnosis, not on your ability to work
  • The benefit is paid as a lump sum so is paid out up front, without a wait period
  • You can use the pay-out however you see fit, it is not restricted in its use. It can be used to extinguish debt in one go, or support you as replacement income for an extended amount of time

So how could this work?

Let’s look at Andrew, a, 63-year-old lawyer. We’ve changed the name, but the figures are from a real client.

Andrew has income protection, with cover of $15,906 per month. He would get half paid out after an eight week wait, and the remaining half after a 13 week wait, but both only have a three month claim benefit. His premium is $223.67 per month.

This cover is mostly offset by any ACC payments available, so would only help by topping up ACC if Andrew can’t work because of an accident, only an illness.

The three month benefit period means he’ll only be paid for three months after his wait period (if he were off for that long) meaning his total potential benefit is just $47,718 – and he would need to be unable to work for a total of six months to receive that.

For a similar premium, $243.74 per month, he is eligible for $100,000 of accelerated trauma cover. This gives him more than twice the pay-out benefit, with no wait period and no requirement for time off work, as an up front, lump sum payment.

In addition to this, his income cover is going to expire at age 65, so the policy he currently has will cancel in two years. Trauma cover can be continued for life – so at this stage of his life and career with all the information available, Andrew may decide it is a much better use of his premiums.

The one downside we would make sure he was aware of is that the trauma cover has a list of specified conditions, whereas income protection is more of a catch all. However the list is extensive, and they tend to be the most common conditions.

What you need to know

You can have stand-alone trauma cover until age 70, however accelerated or linked-to-life cover you can have for life. Because you can have trauma cover for longer, you can get it on a level premium plan, so you know what it will be as a fixed expense which is great for budgeting in retirement.

Different types of insurance are better placed to meet your needs at different stages of life. Trauma cover is not superior to income protection and depending on where you are in your life or career, the best option is often to have both.

All types of insurance have upsides and downsides, and we want to empower our clients to make informed decisions.

It is always best to discuss your options with your adviser, they know the different types of insurance cover available, how to set them up to get the most out of them and what is going to suit you at different stages of your life and career.

 

*some providers offer “to age 70” options at an additional premium

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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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How to get your insurance claim paid

At a conference in February Nadine Tereora, the CEO of Fidelity Life, stated that their claims rating was 99.8%. All the insurance providers Plus4 work with have claims ratings of over 95%, which illustrates very clearly that insurance providers are paying out on the vast majority of claims that are made.

On the back of this evidence, and our own experience, as advisers we are often taken aback by the staunch belief of some people that insurance companies will do whatever they can to get out of paying out on claims.

If you are curious about that small percentage of claims that don’t get paid, read on, and find out what you can do to make sure you are in the 95% if you ever need to claim.

Disclose, disclose, disclose

Yes, all those forms are a pain to fill out, but doing it properly and taking it seriously is critical to getting that pay-out when claim time comes.

We believe the insurance providers we use pay out on all legitimate claims, but insurance providers need all the relevant information to be able to make the decision to underwrite a client’s insurance.

The main reason claims are not paid out is due to material non-disclosure.

Material non-disclosure means things that are relevant or pertinent to the claim. For example, if you have a skin cancer diagnosis but didn’t disclose your knee surgery that shouldn’t be an issue, however if you had previously had cancerous moles removed and didn’t disclose that, it is going to compromise your ability to make a successful claim.

When it comes to making a claim, it doesn’t matter whether the non-disclosure is accidental or deliberate, the claim could be denied.

If you feel tempted to hold something back because you are worried you won’t be covered, you should know that you could still get comprehensive cover, with some minor exclusions for pre-existing conditions. And for some conditions, after a symptom free period you can be covered. Working with an adviser and being honest with them about your concerns and history, means you will know where you stand, and be able to make informed choices about your cover.

Keep policies up to date

One of our Plus4 values is that we will recommend the best policy, but sometimes when we take on new clients and review their current insurance we find they have policies that are out of date, below current industry standards, or not from a provider we would use or recommend.

In these circumstances we would work to recommend a better policy to the client. We make sure the policies we recommend are at the top of industry standards for wordings, and make sure it still matches your current situation.

A potential concern with changing policies is the loss of any pre-existing conditions that were covered, however if we recommend a change there will be good reason to do so. When going through this process we are careful to not lose cover, by applying for the new policy before changing or cancelling the current policy. This provides continuation of cover, and also means that if the provider comes back with exclusions we can work with the client to weigh up their choices.

In addition to making sure our clients have the best cover, we want them to be informed and empowered when making decisions for their insurance.

Understand what you are covered for

Making sure your expectations are aligned with the ins and outs of your cover means you will know when you can make a legitimate claim.

One of the interesting contributors to the statistics on denied claims is a lack of understanding of what different types of insurance cover and claims being made that the policy doesn’t actually cover.

For example, if you have income protection and cannot work because of a health condition your income protection should cover you. However if your child has a severely broken leg and you cannot work because you need to care for them, unfortunately you cannot claim on your income protection.

Depending on your policy however, if you have trauma cover and your child becomes unwell with one of the listed conditions (such as cancer) you may be eligible for a lump sum pay out. When you are choosing your insurance policies, talking through different scenarios with your adviser to understand which policies come into play under which circumstances will help you make informed decisions.

If something happens and you want to find out if you can make a claim, get in touch with your adviser and they will help you understand which policy you should be claiming under will guide you through the claims process.

Work with an adviser

The absolute best way to get your insurance claim paid is to work with an adviser from the very beginning. Our job is to put you in the best claimable position at any given point.

  • Choosing a policy: We work with our clients to get the right policy for their needs and we know the ins and outs of every policy we sell. This may mean choosing a different policy for each spouse, depending on their personal and family medical history, lifestyle and industry.
  • Reputable providers: We are selective about the providers we work with, based on their financial strength rating, product rating and claims rating.
  • Disclosure: Our advisers are expected to go through the disclosure forms with you and be on hand to answer any queries that arise through the process. This is an important part of the applying for insurance, as we want our clients to be able to claim when they need to.
  • Claim process: Supporting our clients through the claims process is an important part of our role. Check out our blog post on how to make a claim to find out more.

A final note

If insurance companies regularly tried to get out of paying legitimate claims, stories like these would not be newsworthy. Insurance claim statistics are high, what drives them down is unsuccessful, non-legitimate claims.

However, New Zealanders are underinsured*, and we believe these sensationalised stories in the media, given without the full background information, are irresponsible because they discourage people from getting insurance.

Getting your insurance cover in place by working with an adviser, and maintaining an ongoing relationship with them, is a critical step in having good cover and making successful insurance claims. If you don’t have an adviser get in touch with one of ours today. If you have an adviser and would like to change to one of ours, you won’t to have to change your policies, though if we think you could have better cover, we will let you know.

*New Zealand has one of the lowest penetration rates of life insurance in the developed world (Massey University and Financial Services Council – Exploring under-insurance in New Zealand) and approximately 30 per cent of Kiwi households have life insurance cover. (NZIER – Resetting life insurance)

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Who owns your policy?

Getting life insurance in place involves a lot of decision making, and choices around the ownership structure of your insurance policies are as important as any other. Keeping the ownership up to date as your life changes is equally vital.

A good insurance adviser will explain that the structure of the cover is just as important as the cover itself – this is because wherever the ownership is placed is where any pay-out will go.

These are some of the issues around the ownership of both personal and business insurance covers that you need to be aware of.

Ownership of personal insurance policies

All polices can be jointly owned, and it is a good idea to make sure they are – for example, an income protection policy can be claimed by a spouse if the policy holder is incapacitated.

It is particularly important for life insurance policies. If you are in a relationship it makes sense that your spouse will be an owner on the policy – this means the policy will be paid out quickly and easily when it is needed.

If you are the sole owner of your life insurance policy this means the pay-out will go to your estate. If you don’t have a valid will it can take some time to be released. As insurance policies are considered relationship property under the Relationship Property Act, it could also be held in probate for up to six months.

The most common issues around policy ownership come into play when there is a relationship break up.

Firstly, if a former spouse or partner is an owner on the policy and the premium is still being paid, they will receive the pay-out. Secondly, if the policy is paid into the estate and it is held in probate, a former spouse or partner can make a claim on it as relationship property.

We had a client who found out his ex-wife was still paying the premiums on a policy on his life they were both the owners of. She was legally able to do this, and to receive the pay-out when he passed as it would go to the remaining policy owner.

The key is to keep your policies up to date and touch base with your adviser when you have any life changes, as they will know what needs to be done to make sure what you have in place still meets your needs.

Another issue to be aware of is insurance policies purchased through a bank. When you take out insurance with a bank, sometimes they own the policy, which means all the anniversary correspondence goes to them – which can make it hard for you to keep track of ownership, and if the policy is still relevant to your needs.

We recently carried out a review with a client who believed he had an income protection policy with a bank, but on closer inspection it was actually a debt protection policy. He was paying for a certain sum to be insured, however the wording of the policy was that “In the event of a claim we will pay you the lesser of the policy or the debt you owe us”. When we spoke with him he hadn’t owed this bank any money for six years – this policy was out of date and totally irrelevant to him, but he had been paying the premium the whole, time and would have received nothing.

Ownership of business insurance policies

There are some key issues around the ownership of business policies as well.

Where there are multiple shareholders in a business, those parties will often take out life policies for each other to the value of the shares. On the event of a shareholder’s death, their shares will pass to their estate, and the life insurance pay-out to the business will allow the remaining business owner to buy the shares back.

In theory, this works very well. In practice there are a few issues to be aware of, and systems you can put in place to prevent them.

While the shares pass to the estate, the directorship does not. This means there may be one director left, who is now solely in control of the company, and of course all its assets. And while the life insurance pay-out was intended for the company to buy back the deceased’s shares, if the premium has been paid by the company the sole remaining director is in control of that asset, and can quite literally ‘take the money and run.’ This can be true even if there is a shareholders agreement in place, because not all agreements deal with what is meant to happen to an insurance pay-out.

To mitigate this risk, the company needs to set up a ‘Buy/Sell Agreement’ and should set up an independent trustee to own the insurance on behalf of the business.

Keeping up to date

Families can fall out, and so can business partners. Who owns a policy and how it is structured are just as important as the cover itself.

Our Plus4 advisers have seen almost every scenario play out, so they have potential issues front of mind when they are helping you set up your policies. Having your insurance structured appropriately from the get-go is the easiest way to avoid issues.

It is also important that you see your adviser as part of your support network and get in touch whenever life changes. Doing so means you won’t end up paying for policies that you don’t need, or that won’t do what you want them to when you need them.

If you want to review your policies to make sure they are meeting your needs, get in touch with one of our knowledgeable and compassionate advisers.

Who owns your policy

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What is ACC Cover Plus? And ACC Cover Plus Extra?

In New Zealand we are lucky to have ACC, which provides us all with no-fault comprehensive injury cover no matter where you are when you are injured.

ACC covers most physical injuries if they are caused by an accident, a condition that comes on gradually because of your work, medical treatment or sexual assault or abuse. ACC provides a definition of a physical injury on their website here.

However, once you move into the self-employed space things can get a little trickier and that is where ACC Cover Plus and ACC Cover Plus Extra come in to play.

ACC Cover Plus

ACC Cover Plus is basically the self-employed version of ACC cover. The rate of cover provided, what is covered and the services available are all the same as ACC. What changes is how you pay your levy and how your cover for lost earnings is decided.

When you are an employee your ACC levy is automatically deducted from your income, however when you are self-employed you are invoiced each year by ACC according to your previous years income and your industry. This means your ACC invoice can vary from year to year depending on your income or if you change industries.

When you are an employee and you lose your income due to an injury there is a very clear line as to what that lost income would be – your wages or salary. Self-employed incomes can fluctuate dramatically from month to month or year to year and this can cause some challenges and uncertainty when trying to get covered by ACC.

New Zealanders are lucky to have access to ACC, and with ACC Cover Plus even as a self-employed person you are covered. However there are two areas that ACC Cover Plus can be challenging. The first is with the levy based on the previous financial year’s income there is uncertainty each year as to what it will be. Secondly the uncertainty around cover with a fluctuating income can leave self-employed people more vulnerable.

This is where ACC Cover Plus Extra comes in.

ACC Cover Plus Extra

With ACC Cover Plus Extra you agree with ACC on a level of cover for lost earnings, to suit your personal circumstances. This means if you make a claim there is no need to prove your earnings, as the weekly compensation has already been agreed. It also means you know what your ACC levy will be each year which makes financial planning smoother.

Moving on to ACC Cover Plus Extra puts you back in control of your premiums, puts you in control of what you get paid at claim time and gives you peace of mind regarding what you will get paid.

Is there a better way of managing risk for the self-employed?

ACC is an expensive type of cover when compared with private insurance. There are some gaps with regards to illness and degeneration, and moving onto ACC Cover Plus Extra is the first step to make things easier.

We then tailor your ACC cover so it is right for you. This may be by reducing the cover and taking on income protection and mortgage protection to top it up, or we could recommend you increase it.

There are three main benefits to taking this approach.

  1. ACC only covers accidents – taking this approach means you will also be covered in case of illness, and if ACC declines to cover your injury on the basis of degeneration.
  2. More cover for less – you can save money on premiums.
  3. Peace of mind – you know how much cover you have, and you know that you are covered regardless of the circumstances of your lost income.

We have had clients who have income protection in place, but are also paying the default ACC Cover Plus Levy – essentially doubling up and paying twice. You can only claim on one of these so you shouldn’t be paying for both of them.

It is important to remember that reducing ACC Cover Plus Extra also reduces the entitlement for accidental death cover. This is where talking to one of our advisers is important so they can advise you of all the implications and how to best cover yourself.

Try our five question ACC survey here and receive your FREE risk management report.

If you are ready to review your ACC levy and make sure you have the most comprehensive cover in place, get in touch with one of our team.

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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.

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Protecting your most valuable asset

Ask people what their most valuable asset is and they will likely tell you it is their home. And should you probe further you will find they probably have their home well insured. Great! Chances are they will have life insurance too. And they definitely have car insurance!

The problem is that your house is not your most valuable asset.

So what is?

You are. Or, more accurately, your ability to earn is. What you will earn in the course of your working life will far exceed the value of your home. It is your income that pays the mortgage that keeps you in the home you love. And it also keeps you living in the manner to which you have become accustomed.

We notice and remember big dramatic events such as house fires or death of spouse and dutifully do our best to protect ourselves and those we love in such circumstances. However long term illness or disability can be less visible and, even when we know someone going through this, we may not think of the long term financial consequences.

This infographic starkly shows why it is time for New Zealanders to shift their understanding of risk management and insurance.

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So what sort of events can impact your ability to earn an income? It could be something small – for someone in a highly skilled job using their hands, such as a surgeon or dentist, a simple kitchen knife accident could be enough to stop them doing the job they are trained for.

Or it could be something big, like a heart attack or cancer. For people under the age of 65 these are the most common illnesses that impact their ability to earn an income. Surprisingly the average age for cancer diagnoses in New Zealand is 41, with one in three of us having some form of cancer before we are 65.

The treatment for cancer, and the after effects, can keep you from the workforce for long enough that the lack of income will become a worry. Long enough to lose your home in fact. Which is the last thing you need in an already stressful situation.

While you might be able to get three month mortgage repayment holiday from your bank, treatment and recovery can take a lot longer. And you need to take into consideration any other debt you may be paying off as well as your day to day utilities and living expenses.

If you’re thinking that this is pretty sobering stuff, the good news is that it’s really easy to protect yourself. Talk to one of our advisers today about your insurance policies, to make sure you have safeguarded your most valuable asset – your ability to earn an income.

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Income protection cover to the rescue

If Beverley Main could tell people one thing about insurance, it would be that even if the premiums feel expensive, it is worth it, because you never know what is around the corner.

Beverley has had a long relationship with Plus4, so when she got a new job with a salary raise and decided to take out income protection insurance, her Plus4 adviser helped her find the right policy.

However, after 15 years in a stressful job as Chief Executive, she found herself facing burnout, anxiety, and heart problems. Unable to work, she had to leave her job and come to terms with the realisation that she would never work again.

Beverley rang her adviser, Grant Uridge, to cancel her policy, as she no longer had an income to cover. To her surprise, he urged her to make a claim.

“It didn’t occur to me that I would be able to claim, but with Grant’s encouragement I went ahead, and it has honestly changed my life,” said Beverley.

Beverley had updated her policy as her income changed, and so had three income protection policies with Sovereign, and found her claim was covered by all of them.

When she left her job, she expected they would have to sell their home and downsize.  With her claim accepted she will be receiving the pay-out until she is 65, which has bought her five years to rearrange her life, and give her a quality of life she wasn’t expecting to have when she no longer had an income.

Beverley is enthusiastic about the help she received from Plus4. “I was very fragile when I called Grant to cancel the policy, and he was incredibly supportive. After what I had been through with my employer it was so nice to have someone who was on my side. He didn’t make any promises that my claim would be covered, but encouraged me to make the claim and see what would happen,” said Beverley.

She also speaks highly of Sovereign. “I had some preconceived ideas about insurance companies so I was blown away by the treatment I received from Sovereign,” said Beverley. “I expected everything to be a battle, but it was the complete opposite, they were so supportive and took away the stress.”

In order to have her claim covered, Beverley needed an assessment from a psychiatrist. Sovereign flew her and her husband to Auckland for the assessment. They also offered her three months of counselling and three months with a Pilates personal trainer. “They wanted to give me my best chance to get back into the workforce, however there was no pressure to do so if I wasn’t able. I felt so looked after, and I felt that they gave me my dignity back,” she said.

Beverley’s policies had included a premium waiver, which means that she doesn’t need to pay the premium on the policy while she is receiving the pay-out. “I had considered cancelling this two years before, but had been advised against it, and I am so glad I listened,” she enthused.

Beverley also recommends that people review their insurance regularly. “Because I reviewed my insurance every few years, and increased the cover accordingly, I am getting paid almost as much as I was earning. I think it is important to have more than just the bare minimum of cover,” she says.

If you want to make sure you have the right income protection for your needs, contact one of our advisers today.

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What is Key Person Insurance?

If you are a small business owner, you need to think about Key Person Insurance. In fact, it may well be a better and more useful insurance option for you than income protection insurance.

Key Person Insurance is ideal for small businesses who have one or two staff who are key revenue generators, or whose work is vital to fulfilling contracts and keeping the business running.

Their absence, whether by serious illness or injury, could have a devastating impact on a company’s financial wellbeing. Key Person Insurance ensures you are well protected, should this situation occur.

While income insurance is vital for those in paid employment, if you are a business owner, key person insurance may well be a better option.

 

How is Key Person Insurance different to Income Protection?

Key Person Insurance, also known as locum replacement cover, pays the sum insured to the business to cover the cost of a replacement staff member, while income protection insurance is designed to cover your personal income.

Key Person Insurance is an agreed value, whereas income protection has an offset clause – meaning if you claim ACC, you cannot also claim income insurance.

With some income insurance policies, you also need to prove your current income to the insurer at claim time. This can be a challenge for business owners and those self-employed who, on paper, can appear to have a relatively low income. Key Person Insurance pays an agreed value.

 

When is Key Person Insurance a better option?  

To decide if Key Person Insurance could be appropriate for you, you must identify the vulnerabilities in your business.

Imagine you are suddenly unable to work because of an illness. You need to take four months off running your company to recover. Will your business survive without you and still be there when you are ready to get back to work?

  • If the answer is yes, then income insurance protection is likely to be the most appropriate insurance option
  • However, if the answer is no, then Key Person Insurance may be more suitable

Key Person Insurance would allow you to hire someone to replace you while you are incapacitated. This means your business would be kept running, and you, as the business owner, will still have an income.

 

Who should be identified as a Key Person?

Key people tend to be business owners, specialists, or personnel responsible for critical customer relationships. A business can take out Key Person Insurance on any employee they consider to be a key person, within certain parameters.

ACC has a table showing replacement cost for a wide range of professionals, updated yearly, here. This can be a good tool to use to make a case to an insurer for the level of coverage you need for a key person.

 

Talk to the experts to find out the best option for your business

Deciding which insurance cover to get can be complex, and if you are paying fixed premiums you need to know exactly what you are getting at claim time. The best way to take care of this is to talk to a professional adviser. We can work through different scenarios and we know the products available inside and out, and can work with you to get the best cover. Call one of our advisers today.

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Do you know about our Claims Advocacy Team?

When you get your life insurance, trauma cover, income protection insurance or health insurance though a Plus4 adviser, you automatically have access to the Plus4 Claims Advocacy Team. This is a great benefit, let us explain why.

If we believe a claim has been unjustly denied, this team will get together and take a closer look at the wording of the policy, the circumstances of the claim and appeal to the insurance provider on your behalf.

While this isn’t a legal service, it provides another layer of accountability to the insurance providers, and is a good first step before escalating a claim dispute to the ombudsman (the Insurance and Financial Services Ombudsman Scheme resolves complaints about insurance and financial services.)

Our Claims Advocacy team are rarely assembled, as we find our customers seldom have claims denied. There are a few reasons for this:

  • Insurance providers pay out
    It might sound a bit simple, but it is true. If everything in your application is in order, and the event is covered in your policy, insurance providers pay 100% of all legitimate claims.
  • Our customers have bought their policies through an adviser
    A simple way to increase your chances of having a claim covered is by buying insurance through an adviser – just like Plus4. We read the fine print, so we always confirm that what you are buying covers your circumstances. This means you are unlikely to have a nasty surprise at claim time.
  • Our customers didn’t buy their policies through a bank
    If you have bought your insurance through an adviser, it means you didn’t buy it through a bank. We have written before about our reservations regarding buying insurance from banks, including non-industry standard exclusions, which can lead to claims being denied when they may have been otherwise covered.
  • The importance of full disclosure
    On the rare occasions claims are denied, it is usually the result of a lack of disclosure. When we help clients choose a policy, we also guide them through the paperwork for the application. The paperwork can seem like a hassle at the time, but the effort pays off when it comes to making a claim.

If you want to know more about our Claims Advocacy Team, or talk about making sure you are covered come claim time, get in touch with one of our advisers.

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7 steps to getting the best insurance cover

Want to get the best insurance cover for you and your family? Here is how you do it:

Using an adviser is always going to get you the best life insurance, income protection and health insurance to suit your budget, lifestyle and life stage. However, some people can be put off by thinking it is a service they pay for, or just not understanding how it works.

The first thing to note is that you don’t pay us for our services. We don’t want getting the best cover to cost our clients so we don’t charge you. Instead, we are paid by the insurers.

Here is our process to break it down for you.

  1. Find an adviser

We get most of our clients through word of mouth. Finding someone who is local makes it easier for you – it is good to be able to meet in person. We have advisers all over New Zealand, check here and find an adviser near you.

  1. The first meeting – Relationship Building

This usually takes under an hour and is a “Getting to know you” session. We want to have a really good understanding of your situation to ensure we can give you the best advice. This includes your budget, your lifestyle and what you want to happen should a crisis arise.

This initial meeting can take place at our offices, at your workplace, or we can come to your home – we’re even happy to come by in the evening after you have put the children to bed!

  1. The Research Phase

After the initial meeting, we have a good idea of what you are after, and we go into research mode.

This means we look at the offerings of a range of different providers, to find the one that best suits your and your circumstances. The independent research we carry out is a key way that we add value to our clients. We then drill down into the fine print to make sure it all stacks up and that we can substantiate our recommendations to you.

  1. The second meeting – Presenting the Plan

We get back with the client and present the plan we have put together.

We need to allow at least an hour for this meeting (and again we can meet wherever suits you best), as we present the plan and then go through the application process. The time it takes to fill out the application can vary – for example, if you have any health issues that need to be considered.

We also fill out payment forms at this meeting, so everything is ready to go once your application is approved.

  1. Approval

If everything is clear-cut, we hear back from the provider and give you a call to say it is all ready to go. Sometimes, as a result of the information provided in the application, the provider may come back with questions or variations to the policy. This is something that your adviser will talk you through.

  1. Claim time

While we all take out insurance hoping to never use it, at some stage you may need to make a claim. We have written a blog on what happens at claim time (you can read it here), but what you really need to know is that if you have your insurance through an adviser, when it comes time to make a claim we will be there to support you, walk you through it and advocate for you.

  1. Follow up

So, we have set up the best policy for your current circumstances, allowing you to get on with life knowing you are covered. However, life changes. To make sure your policies keep up with your life, we check in with you to find out if anything has changed and make sure you still have the best policies to meet your needs. (Here are some of the life changes that might lead to policy changes).

Are you ready to get the best insurance cover? Or do you have questions about how it works? Give one of our advisers a call today.

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How can you reduce your income protection premiums?

As we get older some insurance premiums inevitably increase. We often have clients come in wanting discuss how they can lower their income protection or considering dropping it completely, as what they are spending on premiums becomes a burden that doesn’t seem to match the cover.

Making sure our clients have sufficient insurance cover when they need it is hugely important to us, so before you drop the income protection here are some of our top tips for reducing your premiums.

  • Extend the stand down period of your income protection. Most income protection policies start with a four week stand down before they pay out, however you can extend this period to eight weeks or 13 weeks. This can work well if you know you have a cash buffer to tide you over that period, and you can also have other plans in place such as a taking a mortgage holiday until the cover kicks in.
  • Change the benefit period. Most income insurance policies pay the beneficiary until they reach age 65, however this period can be reduced, with savings to be made. You can reduce the benefit period to five years or even two years – a Gen Re survey showed only 15% of income protection claims last over two years and only 4.1% of claims over five years. Some income protection policies include rehabilitation and the provider will actively work with you to get you back into work.
  • Reduce the benefit. This is not ideal as you want to keep decent cover for when you need it, But, depending on your personal circumstances, you may have enough of a buffer (or other funds you could access) in the event of a crisis that would make this a viable option. If you do choose to reduce the benefit, make sure you talk to an adviser first.
  • Focus on trauma cover. If you reduce your income protection you need to re-think your trauma cover. Trauma cover means you immediately have cash on-hand to deal with a crisis, which is especially beneficial if you have increased your stand down period. The added benefit of trauma cover is that it can be used to cover the second income potentially lost in a crisis – that of a spouse who needs to look after the injured or ill party.

One last point to remember is that the scope of income protection is wider than that of trauma cover. Trauma cover only covers around 45 conditions, whereas income protection covers any injury or illness that causes you to be off work for longer than your waiting period and that meets the policies definition of disability.

Everyone’s circumstances are unique, which is why we always recommend talking to an adviser about your personal situation to find the best solution for you. Want to talk about your income protection? Call one of our advisers today.

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