New Zealand is one of the most under-insured countries in the developed world.

We are good at covering our ‘stuff’ – but we ignore our most important asset.

Regardless of what you own, and how nice it is; car, house and boat, whatever – chances are none of these are your most valuable asset. The majority of us were never told that our most important asset is actually our ability to earn income in the future.

Think about it. For the rest of your working life, how much money are you going to earn? Will you spend the next 15 years on a $70,000 salary? That’s over $1,000,000. But what’s the plan if something happens that prevents you from working over that period?

Obviously this all depends on your unique circumstances, but for the majority of New Zealanders, we still have a lot of earning to do in the future, and no insurance in place for the unfortunate situation where they can no longer work.

No one tells us about, or explains, these kinds of insurances in a way that is easy to understand. So most Kiwis aren’t insuring this crucial asset.

Read more about how to insure your future earning here.

---

We have a false sense of security about what ACC covers.

This is a big one. Most of us have heard of someone getting injured, so badly that they can’t work, and they get 80% of their income covered by ACC.

The problem is ACC only covers injuries that are the direct result of an accident. And even if ACC agrees to pay this 80%, there have been cases where the issue was caused by an existing medical condition, rather than the accident itself. For example someone hurts their back, but scans show a pre-existing back condition the person had. ACC may then stop all payments.

If that person had insurance, for example income protection (where the insurance company will pay 75% of your salary until you can go back to work) then financial stress wouldn’t be on their list of worries, and they can concentrate on getting better.

---

We’re worried that it will cost too much. And we’re wrong.

Your level of insurance should be directly related to how much you can afford to pay in premiums. Depending on your situation, it could cost $10 a week, it could cost $50, but you decide on the level of cover.

Maybe you’ve got a mortgage, maybe you’re saving for a house or just had your first child – all meaning money is tight – no problem. Get the most important insurance in place and set it up to cost you only $20 a week. You might get slightly less of a pay-out in the event of something going wrong, but you will still be fundamentally covered.

If your situation changes and there’s a bit more spare cash, increase your level of insurance cover and up the premiums slightly.

Here is an example of cost:

• A 25-year-old non-smoking female - $100,000 of life and trauma cover + private medical cover = $18.50 per week.* Not so bad, right?

• A 35-year-old non-smoking male - $250,000 life and trauma cover + private medical cover = $25 per week.* That’s reasonable, and provides peace of mind knowing you’re covered.

*Taken as an industry average and is an estimate only. May differ based on individual circumstances such as job, smoking status and health conditions. An illustration will be done by an adviser based on your unique situation.

---

There’s a voice in our head saying,  “she’ll be right”.

Classic. We probably don’t even need to tell you why this one is a no-no. But this is a really common Kiwi mentality when it comes to risk and we need to break it. The below stats aren’t designed to scare you, but rather to show how often these insurance policies are claimed by the people that are fortunate enough to have it in place.

Of the Kiwis that have...

• Medical Insurance – they will use their medical insurance an average of four times before turning 65.*1

• Income Protection – One in five of them will use their income protection. 81.8% of those in the hospital are there due to sickness, not injury.*2 What happens when their incomes stops?

• Trauma Insurance – the biggest claim will be for cancer – Cancer amounts for almost one third of deaths in NZ*3. Additionally, 2 out of 5 people will suffer a critical illness such as a heart attack or stroke.*4

• Life insurance – 17% of the women and 23% of the men will die before the age of 65 here in New Zealand.They are leaving behind a lump sum payment to support their family, even when they are no longer here.*5

---

Using a financial adviser means that you’re much more likely to get the correct insurance (at the correct level) but most importantly, if you need to make a claim, your adviser will go to bat for you, and deal directly with the insurance company to make sure they pay out.

Further, your adviser will touch base every year to see if you need to change your insurance policy so it continues to meet your needs, i.e. get married, have a child, purchase a new home etc.

And remember, you don’t pay a cent for your adviser’s help - they just get paid a fee by the insurance company for setting it all up. Your insurance will cost the same regardless of whether you use an adviser, so it’s a bit of a no-brainer.

 

• *1: HFANZ/NZPSHA Market Research, March 2016.

• *2: Source HFANZ/NZPSHA Major Medical research rate June 2015

• *3: NZ Ministry of Health, NZ Cancer Plan, 2015-2018. 

• *4: Ministry of Health NZ, 2017. 

• *5: NZ Stats Archive, 2016. 

 

How does insurance actually work? (Everything you need to know in 2 minutes).

First, some definitions:

• Insurance = Basically, you pay an amount of money to an insurance company on a regular basis, so that if something bad happens, they foot the bill.

• Premium = Your regular payments to the insurance company. They could be weekly, fortnightly, monthly or yearly - Whatever you prefer.

• Policy wordings = The specific list of things that are covered under any given policy.

• Claim = When something bad happens, you tell the insurance company (make a “claim”). They then look at your policy wordings to check you’re covered for that event, and then accept or deny the pay out.

When you think about it, insurance is actually a great concept, as long as you get it right.

Good insurance is when you have the correct cover for your unique circumstances. And if/when something bad happens; the insurance company pays out like you thought they would.

There are a lot of examples of bad insurance, but some of the most common ones:

• Wrong cover – you think you’re covered for things that you’re not.

• More cover than you need – You end up paying more than necessary for your circumstances.

The whole point of paying for insurance is for it to work at claim time.

Some insurance companies get a bad reputation for not paying up when someone makes a claim. For example, you think your medical insurance covers you for the expensive medication, and you only find out it doesn’t, once you’ve been diagnosed with cancer. This comes down to people misunderstanding what their policy does and does not cover.

Using an adviser means that you’re much more likely to get the correct insurance (at the correct level) but most importantly, if you need to make a claim, your adviser will go to bat for you, and deal directly with the insurance company to make sure they pay out.

Further, your adviser will touch base every year to see if you need to change your insurance policy so it continues to meet your needs, i.e. getting married, having a child, purchasing a new home etc.

And remember, you don’t pay a cent for your adviser’s help - they just get paid a fee by the insurance company for setting it all up. Your insurance will cost the same regardless of whether you use an adviser, so it’s a bit of a no brainer.

Insuring yourself

There are two main types of insurance

Insuring your stuff - The basics. We're pretty good at this. 

Insuring yourself - This is where most people fall short. What happens to you and your family if you can no longer earn an income? Who will cover the mortgage? How will you afford to live?

---

There are four ways to insure yourself

1. Medical Insurance

• Pays for medical bills if you get sick

• Provides private treatment straight away (no waiting for months)

• Gives you access to non-pharmac approved drugs by subsidising them. (ie expensive cancer treatment)

• Kiwis use medical insurance an average of four times before turning 65

2. Income Protection

• Pays a percentage of your income if you can no longer work.

• Most people are off work long-term due to illness, not accident (therefore not covered by ACC).

• One in five Kiwis will use income protection in their life (even for a short amount of time, it pays to have the option).

3. Trauma Insurance

• Pays a big lump sum of money if you are diagnosed with a serious illness.

• Biggest claim is for cancer - one in three Kiwis claim their Trauma pay out.

• Can be spent on whatever you like ie pay your mortgage off, alternative treatment etc.

• If you don't have an income (ie a stay-at-home parent) this money can be used to replace your income protection.

4. Life Insurance

• Your family gets a big lump sum payment if you die or are diagnosed as terminally ill.

• Gives financial stability to your loved ones, even if you're not around. To pay off debt, and provide ongoing support for your family.

• Who do you want the money to go to? You need to specify in your Will, otherwise, the court decides.