I am a risk adviser and I provide advice on three specific risks:
Dying too soon
In my opinion, life insurance is there to cover three specific things:
- Getting rid of debt
- Covering final expenses, eg; funeral, tangi
- Replacing lost income for a period
My life insurance plans are all about getting the numbers right for you. What would you want to happen should one of you die? There is no one-size-fits all. A family with four children and one non-working parent will require a lot more life cover than a young couple with no children.
If you don’t have any debt or dependants, maybe you think you don’t need life insurance. But what will happen to you if you become terminally ill? In this scenario, life insurance could pay out while you’re still alive. I’ve seen two cases of people who were diagnosed as likely to die within 12 months, had their life insurance paid out, and were still walking around years later.
A Will lets you determine what happens to your assets after you die. A Will does not need to be complex. Dying without a Will is known as being intestate and can cause unnecessary additional grief. If you are married and die without a Will, then any assets that you own jointly will automatically pass to your partner, e.g.; your house, life insurance (if the policy is jointly-owned). But what happens if you’re not married? What about blended families? What happens to assets not jointly-owned? If you don’t have a Will, it will be left for the courts to decide. Not only will that take months, but the division of your assets may well be an unwelcome surprise for your survivors.
Unable to earn
New Zealand’s no-fault ACC scheme is unique in the world. ACC has its critics, but it does pay out a lot of money. If you’re employed, then you’re in ACC by default and you pay premiums via the payroll. For self-employed people, ACC has two schemes, Cover Plus (the default one) and Cover Plus Extra. Cover Plus Extra offers you the ability to structure your ACC cover in a way that works best for you.
If you can’t work due to illness or disability for a few weeks, you’ll probably get by. But what happens if you’re off work for 6 months or more? Income insurance is there to help you keep the assets that you’ve built up should you not be able to work.
Some income insurance policies will pay out in addition to ACC. Some won’t. ACC is in essence a Government-funded insurance policy for accidents. It is important that both your income cover policies work together.
New Zealand does have a good health system for acute illnesses. A sudden heart attack and you’ll be rushed into hospital, a stent is put in or you have bypass surgery. Our health system isn’t so great for chronic illnesses, where many face long waiting lists.
Private medical insurance allows you to jump the queue.
Trauma insurance is a lump-sum that pays out in the event that you suffer one of about 46 specified illnesses. The main ones claimed for are cancer, stroke and heart attack, but also covers many nasty illnesses, such as Muscular Dystrophy, Motor Neuron Disease, Parkinsons, etc.
To claim under a Trauma policy, you don’t need to be terminal. In fact, all of my clients who have made a Trauma claim are still with us.
Enduring Powers of Attorney
What happens if you are alive, but do not have the capacity to look after your affairs? This could be due to dementia or a medical event, such as a coma. An Enduring Power of Attorney appoints someone to act for you. There are two types; Personal Care & Welfare and Property. The Personal Care & Welfare is usually someone close to you, eg; your spouse or partner.
Living too long
This is all about paying money forward to the future you. You may have a relative who is elderly and living solely on the pension. They get by, but it’s not much fun. That could be you. However, there is someone who can help the future you – yes, the current you. By foregoing some of today’s pleasures you can put money aside to make your retirement more comfortable.
KiwiSaver is in essence quite simple. You put money into it, so does the Government if you’re under 65 and if you’re employed, so does your employer. The complexity comes when trying to decide how to invest it and how to choose a good provider.
For many investors, KiwiSaver has been their sole investment experience. Further, as sharemarkets had been going very strong since KiwiSaver was started in 2007 (the 2008 Global Financial Crisis did hit markets hard, but KiwiSaver was in its infancy and balances were very low), the 2020 market correction due to Coronavirus was for a generation the first time they’ve experienced a sudden drop in their investments. Having someone to hold your hand during periods of market volatility will pay big dividends in the long term.
My job is to help you put a plan in place to manage these risks. The outcome may well be that you decide to cover some of these risks by way of an insurance policy, but insurance is only one way to mitigate against risks.
Dying too soon is about making sure that premature death doesn’t leave your family in financial difficulties.
Being unable to earn is about discussing the options you have available, including ACC, income protection, trauma insurance and health insurance.
The “living too long” risk is one that is often underestimated. In an ideal world, the cheque to the undertaker bounces, but the reality is that you will have either too much money at the end of your life, or too much life at the end of your money. Sadly, the latter applies to a lot of people.
Part of my advice is helping you make better decisions today and to help you navigate the complexity of the financial world.
This is how I work with all of my clients:
An initial meeting, to see where I can help. This may be to review insurances or to discuss KiwiSaver. This meeting is free.
Subsequent meetings are dependent upon what we agree on in the first meeting.
If an insurance review is required, this is done via a written report that I either email or post to you. Once you’ve read this report, we get together again to implement any decisions. I believe that when you are making important financial decisions, you should have the time to do so.
Two of the key aspects of my service is that I guarantee annual reviews and that I offer a unique insurance reduction service. This will help you keep insurance for longer and will keep it affordable.