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Savvy insurance choice saves business

As an active, fit and healthy man is his 50s, James* didn’t expect a major health scare, so when he got a small cut on his finger, he didn’t think much of it. The cut didn’t heal as expected, and instead got steadily worse.

James had developed drug resistant cellulitis and was rushed to hospital. His condition was so serious that the medical team advised his partner that his children needed to come and visit him – he was in intensive care for eight days and his kidneys shut down.

Doctors recommended surgery, in a desperate bid to save his life. The family were advised that he had an 80% chance of losing his arm. Thanks to the work of an amazing orthopaedic surgeon James kept his arm and has made a full recovery. He was back at work, on light duties, in three weeks.

When James went into intensive care his insurance adviser, Peter Rickards, got a call from his partner at 10 pm on a Friday night asking how he was covered and what they could do. Peter visited the hospital every day, keeping the family calm and working to make sure the cover came through.

“James had a trauma policy with Partners Life, which is triggered by a five day stay in ICU,” explained Peter. “This meant that he had a pay out of $250,000, which meant his business could stay afloat while he was unable to work.” James also had income protection, but because he has a 13 week stand down on the policy and he was back at work controlling his company again within a month he was unable to claim on that policy.

James also had a trauma policy with another provider which didn’t pay out at all. “This provider had significantly poorer policy wordings which meant James did not meet the requirements for a claim – this is a policy we would never sell to a client for these reasons,” says Peter.

For James, this experience showed the value of the relationship he had built with his adviser, and that his trust in Peter to choose the right policies for him, was well placed.

For Peter it reinforced why he loves his job. “Advisers are empathetic and form friendships with their clients,” he says. “You need to work as a team with your clients and always have their best interests at heart, and this means being there when the rubber hits the road.”

Working in an industry that often comes under fire can be frustrating for insurance advisers who work passionately for the best interests of their clients. Peter says he is really proud of the profession and how advisers can improve their clients lives for the better. “We are not salespeople, we advocate for the best policies and getting the right amount of money to the right person at the right time.”

James is now back to sailing, running and diving.  And thanks to his foresight in protecting himself and his business from the unknown, he is back running his company.

If you are ready to have an adviser who is a passionate and dedicated member of your team, get in touch with one of ours.   

*name changed

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

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

Allow enough time

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

Be open with your disclosure

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

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

Give us your full attention

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

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

Be prepared

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

Ask lots of questions

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

Make sure you can both be there

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

After the meeting

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

Relax, we are a team

Lastly, remember that your adviser is on your side.

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

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

Prepare for your meeting with an adviser

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When life changes, make sure your insurance does too!

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

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

What life changes should trigger an insurance review?

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

Mortgage

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

Relationship change

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

Increase or decrease in dependents

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

Employment

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

A change in income

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

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

Special events increase

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

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

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

When should you change your insurance

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What should you do when income protection premiums rise?

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

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

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

What are the issues?

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

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

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

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

How trauma cover can create a solution

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

There are a number of reasons for this:

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

So how could this work?

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

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

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

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

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

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

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

What you need to know

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

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

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

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

 

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

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Is insurance only for those in paid work?

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

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

Why both spouses need personal insurance cover

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

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

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

  • Vic will have to take time off from work

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

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

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

  • Covering Kelly’s unpaid labour

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

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

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

  • Unexpected additional costs

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

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

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

So how do you mitigate the risk?

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

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

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

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

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

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

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

Insurance for spouse

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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.

Who owns your policy

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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.

trauma cover edit

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Do children need insurance?

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

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

Trauma Cover

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

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

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

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

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

Health Insurance

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

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

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

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

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

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

Life Insurance

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

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

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

Congenital Conditions

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

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

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

Should you insure your children

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What is Total and Permanent Disability cover and how does it work?

Total and Permanent Disability (TPD) Cover is an easy one to explain, because it offers you just that – insurance cover should you become totally and permanently disabled.

There is some nuance to how it works, so let’s take a closer look.

What is TDP cover?

TPD is its own standalone cover, however it is also often included as a part of your trauma policy. Like trauma cover, it is a one-off, lump sum pay-out, and is not an ongoing payment like income protection.

To qualify for a TPD pay-out, you must be totally and permanently disabled. While the wording varies between providers (check out more on how we use this wording to find the best policy for you here), most commonly it is that you are so disabled that you are unlikely to ever be able to perform your occupation again, or any other for which you are suitably trained.

There are two types of TPD; covering either your ability to work in your own occupation, or in any occupation. TPD may not necessarily involve a significant accident or illness. For example, just the loss of the use of a hand would render a surgeon or chef unable to work in their profession again.

How much TPD cover do I need?

When deciding how much TDP cover you need, we calculate it along similar lines to life insurance. While income protection is seen as a temporary prop-up to get you through a rough time, with TPD cover you want to be able to extinguish all your debt. You may choose to pay off the mortgage, use it towards medical care, improve the accessibility of your home or workplace, or towards keeping your business afloat.

It is always good to have your adviser take you through the process of setting the level of cover, and conduct regular reviews of your policies to make sure you always have the right level for your life stage.

Do I have to be employed to get TPD cover?

As with trauma cover, you don’t need to be employed to get TPD cover. While the definitions and wording around what constitutes Total and Permanent Disability will change if you are not in employment, a pay-out will depend on whether you can perform home duties and activities of daily living.

How does TDP cover relate to trauma cover?

The key difference is in what the claim assesses.

When making a trauma claim, the claim is based on the cause of the trauma, or the diagnosed event. For example, a stage 3 cancer diagnosis will result in a trauma pay-out, regardless of the anticipated outcome of that diagnosis.

A TPD claim however looks at the anticipated outcome of the event, regardless of what caused it. For this reason, it is a good idea to have both (and they are often bundled together as a policy), as the TPD cover will catch what the trauma cover does not.

It is always important to talk to your adviser to make sure you have the right policies to meet your needs, and that you understand what each of them covers so you have the right expectations at claim time.

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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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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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Are you both insured? Here is why you should be

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

We have written before about the importance of income protection, as your ability to earn an income is your greatest asset. To this end, making sure you have adequate income and life cover for the breadwinner in the family is a no-brainer.

However it is worth looking at the larger picture too. While we often tend to value someone based on their income, this is obviously never the whole story.

For example, if you are at a stage of life where someone is working in the home or only part time, what level of personal insurance cover do they have? And should they even have cover if they have only a small income or none at all?

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, Brian and Lisa, in their mid-thirties with two children under five. Brian is the breadwinner and Lisa is currently a stay at home parent.

To understand why Lisa should have cover let’s imagine what would happen if she was diagnosed with cancer.

  • The breadwinner will take time off work

Brian isn’t going to get up tomorrow and go to work. If it is terminal cancer he is going to want to spend as much time as possible with his wife. If it isn’t a terminal illness, life will be turned upside down with treatments. Depending on where they live these treatments may be a considerable distance from home.

Brian has income protection but it only covers him being unable to work because of something happening to him, not something happening to a spouse.

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

  • Someone has to pick up the slack

If Brian is going to be looking after Lisa, who is looking after the children?

We had a client joke 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.  While that may be a little extreme, it is important to have a thorough discussion about the ramifications of the at home spouse being out of action, and looking at different scenarios. Family and friends may be able to help out but, depending on your circumstances, you may need to look at paying someone to help.

Consider how much pressure the family would be under if, while caring for his wife, Brian used up his annual leave, needed to pay for accommodation away from home and suddenly had to budget for additional childcare costs. Added to the emotional trauma of the illness itself, this financial stress would 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 is by bolstering their trauma cover. While children are automatically covered on most trauma policies spouses are not, so each must have their own.

You may be surprised at how little it can cost – $100,000 of trauma cover for our fictional Lisa 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.

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