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What happens to debt when you die?

When you take on a mortgage, use your credit card or get a new vehicle on finance, you know it is important that you can make the required payments and keep on top of your debt. However, people don’t tend to think about what happens to those debts when you die.

So, what does happen to your debts when you die? The answer is, it depends. It depends on the type of debt, the estate and your next of kin.

The Estate

To understand what happens to debt, you need to understand what an estate is and how it works.

When someone dies all their individually held assets, such as property, cars, Kiwisaver and other investments, become a part of their estate. Jointly owned assets pass to the co-owner, and do not become a part of the estate.

If you have a will you will have identified an executor, and that person will distribute the assets of the estate. Usually debts are paid first, and what remains is distributed to the beneficiaries of the will. If you die without a will (which is called dying intestate) an administrator will be appointed by the courts to administer the estate.

Any funeral costs or legal costs for managing the assets are paid by the estate.

Mortgage

For most people, this is the largest debt they will have in their lifetime, and because of the way mortgages are set up the bank will likely have “first dibs” on the estate to recover what is owed.

If the property is jointly owned, the surviving party will now be responsible for the mortgage. If this isn’t the case, the executer of the estate will need to use money from the estate to pay off what is left on the home loan. If there isn’t enough, they may have to sell the property to pay back the bank.

This is where life insurance plays a key role. If a home is jointly owned, or you will be survived by someone you want to be able to continue living there, making sure your life insurance pay-out is enough to cover your mortgage is a key factor in how much insurance cover you need.

Credit Card

As with a mortgage, the debt on a joint credit card will fall to the remaining party. However, an individual credit card will have the outstanding balance paid by the estate.

With the high interest rates on credit cards, keeping on top of the debt is important at the best of times, so if you find yourself with a lot of credit card debt it is important to put a plan in place to reduce this.

Finance arrangements

That car that is still being paid off, the sofa, TV or fridge on hire purchase, all need to be paid for from your estate. If there isn’t enough in the estate to do this, they may be repossessed.

Tax

If you die with tax owing this is considered a personal debt, so is paid from the estate. If you have business debts, and the business is in your name, this also applies.

Outstanding Bills

You will need to cancel or transfer accounts for phones, internet and power. If you transfer accounts the new account holder will be responsible for any bills owing. If you cancel them the estate will be responsible.

What is there isn’t enough?

Sometimes the debts owing are more than the assets available to pay them off. Unless someone was jointly liable for the debt (such as a co-owner of a property or business, or someone who has provided a guarantee for a loan) family members cannot be held liable to pay off debts. 

We work with our clients to make sure if the worst should happen their loved ones are taken care of. We look at the whole picture to make sure the level of insurance you have is just right for your circumstances. Talk to one of our advisers today.

What happens to your debt when you die
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Keeping you and your family safe over summer

When summer kicks off in New Zealand, so does the DIY and outdoor life that is an ingrained part of Kiwi culture.

Having the right levels of health insurance, income insurance and life insurance is an important part of caring for yourself and your family, but unlike a new bike or paddleboard they are a purchase you hope not to use. This means whatever your holiday plans, it is important to be aware of what you can do to keep you and your family safe.

Keeping children safe over summer

Keeping children safe is an obvious priority for parents all year round, but summer comes with unique hazards.

  • Who is watching the kids? When you have a large group of friends and family together it can be so easy to assume someone else is watching the children. The simple act of communicating “I’m popping inside now, so you are in charge of watching the children,” can literally be a lifesaver.
  • Driveways. All parents know that driveways are a major hazard for children. With summer guests, and groups of families and friends congregating at the bach there is a lot more coming and going. There can also be different people looking after the children (including some who may have forgotten just how fast a toddler can move), and time spent in different houses without the safe set-up and routines of home. If you are visiting a house with children, or someone is visiting you with theirs, make sure you know where everyone is before any car moves.
  • Water. Swimming in the pool, a lake, a river, or the sea is such an integral part of summer for kiwi kids, and going out on a boat is a real treat. Remember to supervise children at all times, know the nature of the water before you enter (how deep it is, how strong the current is and so on) and know your child’s limits. Watersafe has some great tips for any water activity.

Avoiding food poisoning

Summer brings warm, moist conditions – the ideal environment for pathogens to multiply quickly and cause food poisoning. This means you need to take special care when preparing, cooking, and storing food. Follow the clean, cook, cover and chill rules; and take extra care, especially when barbecuing.  

The Ministry for Primary Industries have some great tips for avoiding food poisoning.

Avoiding exercise injuries

Whether the panic of impending swimsuit season after a cosy winter of inactivity, or a New Year’s resolution to get fit, summer finds plenty of people leaping unprepared into a new exercise regimen.

While improving your fitness is a great idea for your long-term health, to avoid injury it pays to be sensible about how you start– this also increases your chances of meeting your goals.

  • If you have any pre-existing health conditions or injuries, you need to speak to your GP or physio before you start a new exercise programme
  • Start gradually; don’t try and make your first run in five years 10 kilometres. Starting slowly not only reduces your chance of injury, but increases the likelihood you’ll keep at it
  • Warm up. This is a key feature of staying injury free. ACC Sportsmart has some good warmups to get you started
  • To help you stay on track, make a programme, stick to it and mix it up with different exercises

Safe DIY

New Zealanders love to indulge in a bit of home improvement around the house or the bach during the summer holidays. And ACC hears a lot about it when things don’t go quite according to plan.

Before you crack into a new project check out ACC’s prevention tips here.

Safer Road trips

For lots of people summer means more time travelling on roads that are less familiar. Time with the in-laws isn’t the worst hazard of a summer road trip. AA has four key tips on their website for safe driving.

Most pertinent to summer road trips are minimising distractions, which means putting some thought into keeping kids entertained and fed, and being aware of your own tiredness. This takes planning; when you will travel, who will drive and when you will take breaks.

Share the load and be aware of when you are starting to struggle. There is no harm in stopping for an impromptu ice cream or brief walk on the beach, to wake yourself up and give your passengers a break too.

Remember to slip, slop, slap and wrap and have a wonderful – and safe – summer. If you want to make sure your insurance is up to date, or need to make a claim do get in touch.   

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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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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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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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Do you need health insurance?

“Do something today that your future self will thank you for.”

Whether or not you are a fan of bite-sized wisdom, this is a great point from which to discuss health insurance.

In New Zealand we are lucky to have a fairly robust public health system which can lead people to think health insurance is a luxury item they can do without.

To a certain extent that may be true but it isn’t the whole story. There are a myriad of benefits to not relying solely on the state to look after you should health problems arise.

Get it before you need it

There are two main reasons you should get health insurance before you think you need it. Firstly the upcoming shift in New Zealand’s demographics, and secondly establishing a relationship with a health insurance provider while you are in good shape.

changing demographics

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 is quite a healthcare burden and raises some questions around the sustainability of our public system.

We don’t know how this will be managed, but the government will need to make some changes to fund this and we may not have the level of public coverage we are used to. We may find health insurance is no longer a luxury but a necessity and those with health insurance already in place, with fewer exclusions, will be well placed.

Pre-existing conditions

The second point is that while the fitter and healthier you are, the less likely you are to think about health coverage – however this is exactly when you should be establishing your relationship with a health insurance provider – before you need it. You will then find yourself to be well covered when the need does arise.

Control over your treatment

Another benefit to having health insurance is getting the treatment you want, when you want it. Whether you are treated in the public or private system you may see the very same surgeon – the difference is how quickly you will see them. Through the public system you can end up waiting months for a non-urgent procedure (defined as anything that can wait longer than a week) which you may get as soon as the following week if you are covered by insurance.

What about setting up a savings account for unexpected medical bills instead?

A popular idea, but many people don’t realise how expensive surgery is. And with medical inflation is rising at a rate of 10% annually, it is going up quickly. The current cost of a hip replacement is $22,000; a heart bypass is $45,000. Even a hernia repair will set you back at least $6,000. This doesn’t mean you shouldn’t have an emergency savings account though – this can really help reduce your premiums by having a higher excess on your plan.

can I cancel it if it doesn’t fit the budget?

Many people have seasons when the budget gets a bit tighter, and health insurance can end up being up for discussion. The two biggest downsides to cancelling your policy are finding yourself uncovered when you really need it, and when you do renew your policy finding you are no longer as well covered if any health issues have arisen in the interim. Health insurance should really be a part of your long term plan, and your adviser is well placed to help you make it work.

One last note on pre-existing conditions – don’t make the assumption that you won’t be covered without talking to an adviser – some exclusions expire after a period symptom free and you will still be covered for more than you won’t be – some coverage is better than none.

If you want to discuss more about your health insurance options call one of our friendly advisers for an expert opinion.

do you need health insurance

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Why you need trauma cover

Trauma protection is an important part of your insurance coverage, but we often find it is poorly understood by clients.

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.

The infographic below shows the most common claims on trauma covers.

Infographic-trauma-cover-01

How do you know if trauma protection is right for you?

If you have medical cover and income protection, having trauma protection can feel like doubling up, but there are a few reasons it can be worth having trauma cover as well, or why it may actually be your best option.

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.

While income protection is important to have, it only covers the insured person if they are unable to work. Some of the challenges life can throw at our families mean that we want or need to have time off work to be there to help our loved ones.

Many trauma policies also cover children – this means that if a child suffers one of the included injuries or illnesses the parents can take time from work to be with the family and focus on recovery without worrying about bills.

Someone who isn’t in paid work, such as a family caregiver, can get trauma cover – meaning should something happen to them, their spouse can take time off work to be with them and focus on recovery and not have to worry about bills.

Some people, such as those in dangerous work, can struggle to get income protection which means trauma cover is the best option. Likewise, if income protection is out of your budget trauma is the next best.

How much is trauma cover, and how much should I get?

Determining how much trauma cover to get, or which provider’s policy is best for you, can be challenging, which is why it is always best to talk to an adviser, who can take into account your individual circumstances, your budget, other cover you have in place and your lifestyle.

Unless you include a “buy back” in your premium, once you have used your trauma cover it is gone. The buy back rate is usually very small (as low as $4 a month) but on some policies it can allow you to claim up to five times, provided there is at least six months between claims and the claim is for a separate event. While it may sound unlikely to claim more than once, it is not uncommon for people to claim three times on one policy.

If you think trauma cover is something you need to consider as part of your personal cover plan, get in touch with one of our advisers today.

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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.

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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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How special events increases protect your future insurability

We all know the only constant is change. However, come claim time you need to be reassured that your cover will be sufficient for your current circumstances. It isn’t practical to set up your original cover for future events – such as getting enough cover for three children when you only have two, or two mortgages when you only have one.

This is where the special events increase comes into play.

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 can change between providers, but they generally include;

  • Marriage or civil union
  • Divorce or legal separation
  • Becoming full-time carer for a dependent relative
  • Birth or adoption of a child
  • Taking out or increasing a mortgage
  • Purchasing a residential property or residential investment property, vacation home or bare residential land
  • A dependent child starting full-time tertiary study
  • An increase in annual salary
  • The death or terminal illness of a spouse, defacto partner or civil union partner

The timeframe in which you need to apply for the increase varies between insurers, and the increase available is different for each event. It is important to speak with your adviser about your plans for the future as well as your life stage right now, and touch base with them anytime your situation changes.

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).

How this can help if your circumstances change

The key element of these increases is that they are available without further medical underwriting. This means that should your health change you are still eligible for an increase to your cover (provided you have not been diagnosed as terminal, which is defined as 12 months).

We recently had a client who got life and trauma cover with us. There is a standard three month stand down for cancer on new policies, and unfortunately, she was diagnosed with an aggressive form of cancer within five weeks. We worked with her to get the pay-out covered but were unsuccessful. At that time, she hadn’t been diagnosed as being terminal, but with the aggressive cancer she had it was likely.

We advised her to take out a $100,000 loan, and increase her life cover by $100,000 as a special events increase on the loan. This gave them money to live on, and when she tragically lost her cancer battle her husband was able to repay the loan with the extra cover on her policy.

The advantage of working with an adviser

If you had your insurance from a bank you would get a yes or no answer – the bank wouldn’t tell you any workarounds. The huge benefit of working with an adviser is that they are working for you and know the policies inside and out and know how they can help you make the policy work for you.

Just because your health has changed doesn’t mean it is all over in terms of increasing your life or trauma insurance. There may still be ways that your adviser can help you get the most out of your policies, and is always best to bring them into the loop as soon as possible so they can work with you effectively.

Want to discuss your future insurability or talk about a special events increase? Contact one of our friendly and knowledgeable advisers.

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Trauma Cover – the best safety net

When we meet with clients we work to help them understand scenarios where they would use the different insurance covers. When everything is going well it can be hard to imagine life any other way. We spoke to a Plus4 client about her experience with trauma insurance to give a real life example of the difference it can make.

In November 2015 Jess and her husband Brian decided to get in touch with Mike Tonks at Plus4 to review their personal insurance. “Brian had met Mike through setting up insurance for the business,” explains Jess. “He was impressed with how thorough Mike was, so thought he might be able to help us with our personal insurance as well.”

Jess and Brian found Mike good to work with and transferred their personal insurance to Plus4. “I really felt like he wasn’t trying to sell to us but was looking at our situation and thinking about which types of insurance would help us. He offered different options, and described what each was there for, and gave examples of how different events could play out for us, which gave us a really clear picture,” says Jess.

As part of the review Jess and Brian got $150,000 of trauma cover, which included a three month stand down after getting the cover in place.

In July 2016, four months after the stand down ended, Jess, aged 43 years old, was diagnosed with breast cancer. The cancer was aggressive but was treatable with chemotherapy, which meant a gruelling year and a half of treatment lay ahead.

Jess sat down with a friend and went through everything she would need, including finding out what insurance she had and how it could be used.

Living in Queenstown, if Jess used the public system for her treatment she would have to travel back and forth from the hospital in Dunedin for treatment, which was a seven hour round trip. Having health insurance meant she could choose where to have her treatment, and so she chose to attend a clinic in Christchurch.

The trip by plane was much shorter, which meant she could fly to Christchurch, have treatment and fly home again in time to be with the children, aged seven and nine, after school.

So what did Jess and Brian use the trauma cover for?

  • Flights – giving her the freedom to choose where to have treatment, and minimise disruption to the children’s lives
  • Hotels – the aftermath of treatment sessions is unpleasant and unpredictable, and while there was family to stay with in Christchurch when she did have to stay overnight, the privacy of staying in a hotel made Jess more comfortable
  • Food – being able to afford quality pre-prepared food for the family took a huge burden off Jess and Brian in a hard time
  • A cleaner and gardener – Jess was unable to use her arm for a while
  • A getaway for the family
  • Keeping the family financially afloat as Jess took a year off work

“While it was great to know we had the money coming, we weren’t initially sure how we would use it,” Jess remembers. “Some of these things were real luxuries, and some of them just allowed us to hunker down and work on me getting well.”

And while it was a significant sum, Jess says they were happy they had as much cover as they did as the expenses added up quickly. “Mike explained it was the best safety net you could have, and I am so glad we listened to the experts, because the premium was very little considering the huge impact it made when we needed to claim,” she explains.

For Jess and Brian, having trauma cover took pressure off the family at a time when things were extremely unsettled, and they were facing a large unknown.

If you want to review your cover or talk to an adviser about trauma cover, get in touch.

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Have you thought about the future when insuring your business?

When you set up your business insurance, the focus can be on the here and now – how many employees you have and their level of skill, the business income, level of debt and so on. However, thinking about the business’ future insurability is also worth considering.

This allows you to look forward and consider your needs in the coming years as the business grows and changes. By reserving the additional cover now, you won’t have to apply for a new policy, or repeat the pre-approval process down the track.

How does the Business Future Insurability Option (BFIO) work?

A client bought a farm and needed to get business insurance. It was agreed that $2 million would be enough for their current needs, however they knew the farm next door would be coming up for sale in the next ten years and they wanted to be able to buy it, and be able to insure it even if circumstances had changed in that time.

In anticipation of this future plan, they took out $2 million of cover right away, but also set their future insurance for $3 million. When they bought the second farm, increasing the insurance premium was straightforward.

While exact details can vary between providers, the key limits to using the increase usually relate to the increase in value of a key person to the business over three years, an increase in financial interest in the business averaged over three years, and an increase in the loan guarantee.

You need to be taking out the original sum at the time to be able to set up the future insurability option, and the maximum amount insurable is five times the original sum assured, up to $5 million.

So how much does the future insurability benefit cost?

The extra premium is relatively low, but varies depending on your original sum insured and how much you have reserved for the future. The premiums will also increase as the cover does. This is where your adviser can help with tailored advice for your current and future circumstances.

What about future insurability for personal insurance?

Most life insurance policies have a built-in ‘special events’ increase which means you can increase your existing cover, without further underwriting, in circumstances such as having a child (by birth or legal adoption), marriage or civil union, divorce or the dissolution of a civil union. The specifics can change between providers but they may also include financially supporting a dependent child through a first course of full-time tertiary education, taking out or increasing a home loan, becoming responsible for the full-time care of a close relative, or the death of a spouse or de facto partner.

The increase available is different for each event, and what is offered can vary between providers, so it is always good to talk with your adviser about your plans for the future as well as your life stage right now.

Want to discuss your future insurability or talk about a special events increase? Contact one of our friendly and knowledgeable advisers.

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How well does your medical insurance cover cancer?

Cancer is a scary diagnosis and it is important to have an accurate understanding of the role health insurance can play in access to different treatments.

The cost of cancer treatment can be high, and not all the medications that are available are currently funded by Pharmac, New Zealand’s Pharmaceutical Management Agency. That means people can be left to pay privately for the medicines that may give them their best chance.

You may have seen, or even contributed to, private campaigns to raise money to help fund cancer treatments not covered by Pharmac. Some of these medicines can buy people a little more time, however others may make the difference in actually beating the cancer.

While we do have good access to cancer screening and treatment in New Zealand, and generally expect treatment to be covered by the public system, the media coverage these fundraising campaigns have received has made us more aware that this may not always be the case. Pharmac, is a government agency that decides which pharmaceuticals to publicly fund. The reality is that they are not going to be able to cover everything for everyone.

When reading these stories and contributing to private campaigns, those among us with medical cover probably feel quietly relieved that, should we find ourselves in this situation, we will not have to rely on donations from strangers to afford the medicine we need.

Unfortunately, it isn’t actually that simple.

Some medical insurance providers do cover cancer treatments that aren’t funded, however many don’t. Whether your insurer will or won’t provide this kind of cover will be in the fine print of your policy. If you are buying your insurance through an adviser, they will know which do and which don’t – here at Plus4 Group we only sell those that do.

Most policies have an upper policy limit of $200,000 per claim per year and will be covered if the treatment is recommended by a specialist.

There are a number of health Insurance policies that have low limits for non Pharmac medications and limits for chemotherapy and radiography. Your Plus4 adviser will be able to identify for you the policies that are available and what will best fit your circumstances.

There may be times that a policy with different limits will work best for you, such as your employer offering cover as part of your salary package. With Plus4 it is all about finding you the right covers.

It isn’t just medical cover that can help out with a cancer diagnosis; trauma cover can pay out a lump sum which can make a big difference with medical expenses and lost income.

As insurance advisers it is our job to know the ins and outs of every policy so we can help you get the very best cover, with no disappointing surprises at claim time. If you want to discuss your medical cover, or any other cover, get in touch with one of our advisers.

Does your health insurance cover cancer

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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.

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How to make an insurance claim

Once insurance cover is in place it is something we rarely think about – until it is time to make a claim. The circumstances around making a claim are likely to be stressful, to make the process as smooth as possible, we have put together our best practice tips.

Contact your adviser

The first step is to call your insurance adviser, and this is a time when the decision to purchase your insurance policy through an adviser will really come into its own.

The relationship you have with your adviser means that they know you, your circumstances, and your policy details. This means you don’t need to find and decipher your policy at a worrying time. Your insurance adviser will immediately have a good idea if your event is claimable and can give you a quick answer before starting the claims process.

While the call centre staff at insurance providers are great people, and good at what they do, they don’t have the relationship with you that your adviser does. Your adviser also works with the insurance provider every day. This means they have a good relationship with them and understand the way they, and the claim process, work. That alone will make the process smoother, and therefore less stressful.

Filling out the claims forms

After you speak with your adviser they will send you the claims form and provide you with any support you need to have them accurately filled out. There will be a section for your personal details, and a section for any relevant professionals (such as a medical specialist).

They will also alert the insurance company that a claim is coming.

You need to get the completed form back to your insurance adviser as quickly as you can. They will check to make sure it is complete, and then deliver it to the insurance provider. The length of time the assessment takes depends on how much information is needed and how quickly the completed claim form gets back to the insurance company. In the case of a death event the insurer aims to have it approved within seven days. Once a claim has been approved, payment will be made overnight.

Medical insurance claims

In the case of medical insurance, there are two ways of going about making a claim; pre-approval or post-approval.

If you are having a health scare and have scans or other diagnostics booked in, you can get the claim process started with your insurance provider and apply for a pre-approval claim before the appointment. This means that everything is ready to go when you get your results back. If everything is okay you don’t need to make the claim, if not, the claim is already under way and is one less thing for you to think about.

If you are unable to process a pre-approval claim, you can make a post-approval claim, and this process is the same as claiming on other types of cover.

Claim approval

Once the claim is with the insurance provider they will get in touch with you directly, however your insurance adviser will be kept updated on how your claim is progressing and will be available to support you with any concerns you have. If need be, they will also advocate for you.

It is very rare for a claim to be declined. Legislation is in place to make it very difficult for insurance providers to “get out of” paying on an insurance claim.

Claims that are denied are usually the result of a non-disclosure by the client – even if the non-disclosure was accidental. This is one of the advantages of purchasing your insurance policy through an adviser – our process is so thorough that it is unlikely you would forget to disclose anything. Answering all those questions may seem tedious at the time, but it means come claim time there shouldn’t be any problems.

Our clients also have access to the Plus4 Claims Advocacy Team, and if we believe a claim has been unjustly denied, this team will get together and take a closer look.

When to make a claim

It is always best to make a claim as soon as possible. Depending on the policy and provider there can be a varying window of opportunity to make a claim, and some of our clients have successfully made retrospective claims. Read more about it in our blog post Is it too late to claim?

At Plus4 we work for you and we value our relationship with you. If you have any questions about a potential claim, do not hesitate to get in touch with your adviser.

How to make an insurance claim

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What is an enduring power of attorney – and why do you need it?

Getting life insurance, trauma cover, total and permanent disability cover, and creating a will are great first steps in your estate planning. The next, and more often overlooked step, is to create an enduring power of attorney (EPA).

In New Zealand, you can also set up an ordinary power of attorney. An enduring and an ordinary power of attorney have different parameters and purposes.

The person who grants the power of attorney is the donor, and the recipient is referred to as the attorney.

Ordinary power of attorney

This is a temporary set up, for a specific purpose and time period, and gives someone the power to act on your behalf in your absence. For example, managing a bank account while you are out of the country.

It is either set up for a fixed term or can be cancelled. The attorney cannot have more power than the donor. As a result, if the donor loses their capacity to make decisions, it is cancelled.

Which brings us to an EPA.

Enduring power of attorney

You can assign someone EPA, but it only comes into effect if you become unable to make decisions for yourself, or unable to communicate those decisions. Some examples would include dementia, a stroke or a head injury.

You need to put some serious thought into setting up an EPA. It makes sense to do it when setting up your will, as it involves making equally important decisions.

There are two types of EPA; for personal care and welfare, and for property.

Enduring power of attorney for personal care and welfare

This comes into effect only when the donor loses mental capacity.

The person who has been given an EPA for personal care and welfare works with medical staff and care providers to make decisions about your health, accommodation, and other care decisions.

You can only appoint one attorney for this EPA, and it only comes into effect if a medical professional or the Family Court decides you have become ‘mentally incapable’.

Enduring power of attorney for property

This EPA covers your money and assets, and you can have more than one attorney for this, or even a trustee corporation.

When setting up this EPA you can specify whether the power comes into effect immediately, or only when you lose mental capacity.

How to choose your enduring power of attorney

You need to choose someone you can trust to make good decisions regarding your care. You can choose the same person to be both your personal care and welfare attorney and your property attorney, or you may find you prefer someone different for each. It may depend on your relationship with them and their skill set. If you choose different people, it is wise to consider if they will work well together, as it is a requirement that they communicate with each other.

For an example, consider if you had a stroke and were unable to communicate and you had selected different EPA’s for each role. Your personal care and welfare attorney would work with the medical staff making decisions about your care, but your property attorney would be working with your insurance provider on your trauma cover pay-out to cover the costs of that care.

It is important that your attorneys are people you trust, and that have a good understanding of your values and what your wishes would be in such a situation. You can also stipulate certain people that your attorneys must consult with on EPA decisions.

Why set up an EPA?

Setting up an EPA may sound a bit complicated, but it is a very important step. As with many personal insurance decisions, having an EPA in place is about looking forward, and looking out for the people you care about. If there isn’t an EPA in place, your family may have to go through the cost and stress of getting a court order to make decisions about you and your property.

For more information about estate planning, check out our article about writing a will and life insurance.

To review your insurance policies to make sure you have the best cover in place, 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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The Four Pillars of Plus4 Insurance Solutions

At Plus4 we have a promise we make to our customers: “Choosing the best of the best for you”. This promise represents our point of difference, is the statement that we live by, and has remained unchanged since Plus4 was founded.

In addition, our practice is founded on four core principles or pillars, Best for You, Advocacy, Local but National, and Relationships. These principles four pillars guide us in choosing the best personal and business insurance cover for each individual client.

Best for You

We select the best for you – by using independent research combined with the collective experience of Plus4 Advisers. We believe this gives us a level of transparency, which means you can trust our advisers to give you independent advice.

We start by assessing the independent product rating. This gives us an indication of how the different policies stack up against each other, by looking at their policy wording at an in-depth level. Insurance is only as good as the fine print that it is written with, which is why we use independent research to qualify the products we use. It means our selections are not based on our opinion, or the relationship we have with providers.

We use independent research houses, including QPR, Iress, and Plantech, which research all the products on the market and give an unbiased analysis of the features of each.

It is worth noting that while insurance houses open their products to these independent reviews, there are a number of banks who provide insurance, that do not. In our view, this is because ‘in-house’ bank insurance products often rate very poorly in these independent reviews.

The second element we examine is the provider’s financial strength rating. This is rated by A.M Best, and Standard & Poor’s (Australia) Pty Ltd, and gives an indication of an insurance provider’s solvency and ability to pay out on claims. There is no point in us helping you get good coverage if the provider can’t pay out at claim time! It’s worth noting that there is also legislation ensuring insurance providers are able to cover their claims, and this was tightened after the Christchurch earthquakes.

Lastly, we look at the claims rating of a provider, which means how many claims they have approved versus how many they have turned down. For example, Sovereign pay 96% of all claims, which is considered a very high rating. It is most likely that the bulk of the 4% they didn’t accept were claims that shouldn’t have been made.

If a provider has a low claims rating, it is an indication that they may have non-industry standard clauses in their fine print, or less-than-stellar business practices. We want the best coverage for our clients, so this means we will avoid these providers.

Advocacy

Through the strength of Plus4, we are able to help achieve the best possible policy terms during the application process and deliver the most successful outcome at claim time.

If we believe a claim has been unjustly denied, our Claims Advocacy 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, at no cost to the client. We have had tremendous success in this space, in the rare event that we do experience claims issues.

Read more about our Claims Advocacy Team in our article here.

Local but National

From Whangarei to Invercargill we have 44 advisers, working from 28 locations. This means not only is there is an adviser near you, but that adviser is also supported by our head office and the entire national team.

Relationships

Of utmost importance to the way we operate is developing trusted relationships that last. Providing you with confidence in your choices and at claim time, we are your personal insurance advisor and are with you to help throughout every stage of your life. This means when your circumstances change we are there to make sure you still have the best coverage, and should need to make a claim we are there to help you through it.

Lastly, overarching and supporting our four pillars is the independent best practice review process. We engage a company to conduct an annual review of Plus4 advisers to ensure we are complying with legislations, regulations and codes of conduct. This is not a requirement of the industry, but something we take on voluntarily because we believe it provides another layer of transparency and assurance to our clients.

To make sure you are getting the best insurance coverage, from a passionate and professional adviser, contact one of our team today.

The circumstances of every claim are unique, so always talk to your adviser about your circumstances and your policies when making a claim – we are here to support you through this process. 

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Do you need life insurance? And how much?

Helping our clients with life insurance is a key part of what we do here at Plus4. It’s an important topic, so we’ve answered some of the most common questions people ask us.

  • Do I need life insurance?

What sets life insurance apart from other insurance policies is that it is generally not for you.

Life insurance is almost always for someone else, so the question is best answered by looking at your circumstances and the people you care about. If there would be a financial shortfall created by your untimely departure, then yes, you definitely need life insurance. On the other hand, if you have a freehold home and no dependents, then your need for cover may be minimal, if at all.

  • How much life insurance do I need?

Again, we need to go back to remembering that it isn’t about you. So, it is better to frame this question as how much life insurance do they need. An exercise we take clients through is to think about the value of your income to your family over the next 20 years. That could be the loss to your family if you are not around.

This is a complex question, with so many variables, and answering it is one of the times where the value of using an adviser shows. Having someone who will sit down and get to know you (and get a grasp on your life stage, your budget and your values) makes a world of difference in deciding how much life insurance you should have.

Key factors to consider include covering any debt, replacing ongoing income, covering a mortgage and what kind of lifestyle you want your loved ones to lead. If you have dependants you will also need to think about how to provide for the people that will be providing for your children, and how you will structure a pay-out should both you and your partner be gone.

  • Who gets my life insurance?

Most policies are set up to be jointly owned, by both the insured party and the intended recipient. This makes everything smoother at claim time. It also means that it is important to update policies should there be a change in your relationship status.

If the situation arose where both policy owners were deceased, the insurance pay-out would become a part of the estate, or go into a trust if one was set up. Read more about setting up a will here.

  • Is there any way I can access my insurance benefit before I die?

There is a Terminal Illness Advance in most life insurance policies, which means if you have a terminal illness and are likely to die in 12 months you can receive your full insurance pay-out ahead of time.

  • So, what happens when a policy holder dies?

One of the huge advantages of having an adviser is that we are always available. You can call us if something happens and we can help you through the process, every step of the way.

Upon receiving notification that a policy holder has died, most insurance providers will immediately release $10,000 to $15,000. On receipt of a death certificate, the remainder of the pay-out is released, which can take a few days.

Check your life insurance policy regularly

It is important to remember that life insurance shouldn’t be static, it should match where you are right now. This means as your family or your assets grow, you may need to increase your sum insured. Then, as your children become independent and the mortgage goes down, so should your sum insured.

This is one of the big differences between and insurance salesperson and an advisor – a salesperson wants to sell you insurance; while an advisor is in it for the long haul. An advisor will make sure you have an appropriate amount of coverage at each stage of your life.

Read more about when to update your policies here.

Life insurance could make a big difference to the ones you leave behind

On a final note, we can all agree that no one likes paying premiums, but everyone is grateful for insurance when they need it. We have never heard anyone say they had too much insurance at claim time.

If you want to get life insurance set up, or review your insurance policy to make sure your sum insured isn’t too high or too low, 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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How does your mortgage influence your insurance choices?

Getting adequate insurance cover is an important part of the getting-a-mortgage process – and one the bank wants taken care of before things go further. This includes life insurance, trauma insurance, income insurance and, of course, mortgage insurance.

Often when insurance advisers discuss personal insurance needs with a client we use their mortgage as a starting point – which of course is not to say it is the only factor to be taken into consideration. But your mortgage does influence the types of insurance you choose, and how much insurance cover you need to have.

Here is a break down of the different personal insurance types and how they relate to your mortgage.

Life insurance

The size of your mortgage is a really good place to start when deciding how much life insurance cover to get. Knowing that, should something happen, those left behind do not have to worry about mortgage payments and losing their home provides significant peace-of-mind.

From there you need to think about your lifestyle, any debts that need to be covered and how long the beneficiary needs to be able to live on the insurance.

Income insurance and mortgage protection

There is a perception that income protection is expensive, but you don’t actually need to cover your entire income. We have written before that your greatest asset is your ability to earn an income and recommend you read that blog to grasp the importance of income protection, but in relation to your mortgage you should also think about mortgage protection.

You cannot claim income protection and ACC at the same time – this is because the Insurance Act states that you cannot be better off on insurance than you would be if you were working.

However, mortgage protection is a subset of income protection designed to cover your mortgage repayments should you be unable to work. Importantly it has no offset clause – this means if you are unable to work you will receive your mortgage cover payments, regardless of whether you are also covered by ACC or by your income protection.

When you set up a mortgage protection plan you can choose how quickly you want the cover to start, such as four weeks, eight weeks or twelve weeks, and how long you want the cover to continue – anything from three months to the end of the cover term.

It is important to note that more providers are now offering rental cover as well which works along the same lines as mortgage cover.

Trauma Cover

Trauma cover can also be used to cover your mortgage payments. The key advantage of trauma cover is that it is a once off pay out for a traumatic medical event (read more on our blog post here about how it works) and you can use it how you best see fit.

The main point to remember is that everyone’ s circumstances are different, and sitting down with a adviser and talking about your mortgage and lifestyle will help them come up with the package to best suit your personal needs. So call one of our advisers today to discuss getting the best insurance cover for your mortgage.

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Is that short term incentive really best for your long term insurance plan?

We are all keen for a bargain when we can get one, and getting personal insurance cover is no different.  But the reality is that jumping on board with a policy because of a special offer is rarely a good move in the long term, and as we have discussed before personal insurance, be it income protection, life insurance or health insurance, is a long term game.

The famous Stanford marshmallow experiment of the 1960s looked at delayed gratification. A child was offered a choice between one small reward provided immediately or two small rewards if they waited for a short period. One third of the children were able to delay long enough to get their reward.

While we would like to think that we are all smarter than a child offered a marshmallow, one of our brokers recently confessed to refinancing their mortgage because they wanted the TV that was on offer. The immediate, tangible reward or saving right in front of us is hard to ignore for savings further down the road.

There are issues we come across again and again where people have chased the bargain and set themselves up for higher premiums or less thorough cover when they need it. While some of it we have said before, it is important enough that it bears repeating.

Beware the banks

We have heard of banks offering a discount on a mortgage rate if the mortgagee takes out their home, contents and personal insurance with the bank. At a time when you are looking at committing to a mortgage that is a fairly compelling offer.

But is it worth it?

Banks in particular have a less than stellar record with insurance. ANZ for example has a 36 month exclusion for suicide*, which is three times longer than the industry standard of 12 months, and an unlawful acts exclusion which is not an industry standard.

Insurance policies sold through banks also tend to cost you more in premiums than policies bought through a broker.

Watch out online

Buying insurance online can be appealing because it can be faster and seem more straightforward than visiting an insurance broker, and there are often promotions that look good. However the cover provided by online insurance companies rarely stacks up to that offered by brokers and the premiums are often higher. If you sign up during a special offer they can increase dramatically after a set period.

When you get a quote on personal insurance from a broker you will get a ten year projection on the premiums, so you have a good idea of what you are getting yourself into.

Ideally you should be changing policies as little as possible, as anytime you have to reapply you may have exclusions added as the result of changes in your health or lifestyle, which means you shouldn’t just jump from special offer to special offer.

The devil is in the details

While all the ins and outs of a policy are right there in the fine print, even if you read it do you know how it compares to other policies? We do. When you get a quote from us we know what is in the fine print of each of the policies we recommend for you, and can talk you through how these can impact you.

If something sounds too good to be true, or appears dramatically cheaper than other options there is usually a reason for that. If you feel you are being pressured into buying insurance from the bank take the time to talk to a broker about your other options. While you will end up with better quality of coverage through a broker you may find by looking at the ten year projections you save more than you would have through a lower mortgage rate anyway. Remember, there is a fine line between financial coercion and a financial incentive, one of which is illegal.

If you want to talk to someone, who has read all the fine print, about getting the best personal insurance cover for your circumstances, call one of our brokers today.

* As stated in “ANZ Life & Living Insurance Policy Document, 13 September 2015”

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Welcome changes to the Financial Advisers Act

In a recent press release our Group General Manager, Peter Standish welcomed the planned changes to the Financial Advisers Act (FAA) announced recently (13 July 2016) by the Commerce and Consumer Affairs Minister Paul Goldsmith.

Plus4 Group General Manager Peter Standish said, “The proposed changes are a step in the right direction and we look forward to seeing the detail of the new regulatory regime when the bill is introduced to Parliament later this year.

“Replacing the confusing adviser designations (AFA & RFA), introducing the requirement that advisers put their client’s interests first and provide advice only where they are competent to do so are particularly welcome.”

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Under the proposed changes, the current adviser designations will be replaced with those providing financial advice being known as either a ‘financial adviser’ or an ‘agent’. The changes also herald a universal consumer-first obligation on all those providing advice to put the interests of the consumer first.

“Currently only some advisers have this obligation and these proposed changes are entirely consistent with Plus4’s embedded position around putting the client first. We consider that if you’re an adviser as opposed to a ‘salesperson’ you have a fiduciary responsibility to ensure that the advice you give puts your client’s interests ahead of their own.

“The advice driven process adopted by Plus4, as opposed to a sales and product driven process, means we are very well placed to implement the impending changes as does our ethos of using independent research to choose the ‘best-of-the-best’ when recommending product applications to mitigate personal financial risk with clients. This ethos is also entirely consistent with the recommendations in the paper,” Peter Standish said.

Established in 2008 in Nelson, Plus4 Group members work predominantly with small to medium sized enterprises, their owners, and their accountants.  The group, which has 56 advisers across New Zealand, has no affiliation with any specific provider and uses independent research to identify solutions that best meet their individual and business clients requirements.

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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.

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