The importance of being earnest about insurance cover

Just because you were insured yesterday, doesn’t mean you’ll be covered in the future. Alex shares a powerful story that illustrates the importance of an annual insurance review.

You may have read the story of the Auckland mother who was suddenly struck with Guillain-Barre syndrome in August of this year. She had a trauma insurance policy in place for over 20 years and was devastated to find that her insurance policy did not cover Guillain-Barre syndrome.

Trauma insurance is a complicated product compared with life insurance and there is a big difference between the types of cover and the conditions covered in your policy. Many people assume that if something traumatic happens to you then your trauma insurance will cover it. However, not all policies are created equal and it pays to check the conditions listed in your policy. Cheap polices may cover five to ten different conditions, while the quality insurance cover may cover up to 40 different conditions with better policy wordings.

In this instance of the women with Guillain-Barre syndrome, her policy had not been changed since she had originally taken it out over 20 years ago. With the advances and changes in medical treatment over the last 20 years her policy wording would have become outdated and covered conditions that were considered traumatic at that time. So, outside influences can influence your cover, even if things from your point of view haven’t changed.

The good news is that trauma cover policies are typically getting better and better with more conditions being covered.

So, what does all this mean for you and me?

The above case highlights the importance of reviewing your cover annually. Making it an annual habit makes sure it gets done and we can do much of the leg work for you.

This annual habit to update your insurance will ensure your insurance reflects any industry changes or changes in your life situation and, most importantly, that your insurance cover has the highest likelihood of payout.

We are always happy to review your cover or simply just have a chat about what you need.

Alex Barendregt is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Are you a Sovereign client?

Graham explains what the top-level changes at Sovereign mean for clients.

You may have heard, or not (if you prefer the entertainment sections of Stuff.co.nz rather than the business section), that there are changes afoot at Sovereign. 

Sovereign is New Zealand's largest life insurer. It also has a mortgage product. Both Sovereign and ASB are owned by Commonwealth Bank of Australia or CBA. 

CBA has signaled the possible divestment of its life insurance businesses in New Zealand and Australia is basically being driven by the increase in compliance for insurance sales in Australia and that compliance is coming to New Zealand.

In a nutshell, banks have changed their minds and now no longer want to own insurance companies.

What does that mean for those of us who are Sovereign Insurance clients? Basically, nothing.

It’s business as usual for Sovereign and, if they are sold, then the new owner, by contract law, must honour all the existing policies that Sovereign holds. In fact, new owners could bring some innovation and new ideas. 

If you want more information and/or if you think it’s time for a review of your existing cover, please contact us.  

Graham Goodisson is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Who owns your insurance?

Alex is our resident detail guy, which is handy when talking about the finer points of insurance. In this case, he investigates the importance of getting policy ownership right … and tweaking it to suit life changes.

Whenever you take out insurance there is a simple question that can have drastic consequences to the end result come claim time:

“Who is the policy owner?”

In most cases this will be you, your partner, your business partner or sometimes your parents/siblings. Assigning ownership to the right person/s is a great start but life changes can also require a re-look at this ownership structure.

For example, you might have taken out life insurance when you were still single and now you have a partner and kids and you’ve started a business. In this case, you will definitely need to re-look at your cover and ownership of these policies.

For further explanation, let’s look at a common example:

·      Joe and Mary are married and have two kids. Joe owns $500k of life cover to set up his kids in case he is not around anymore.

·      Years down the track, Joe and Mary decide that being married is not the way forward and both go their separate ways.

·      Joe stays single but Mary remarries a few years later to John who already has three kids.

·      Joe suffers a serious trauma and dies not too long after. Sorry about the tragic story but at least he had cover …

·      Life insurance proceeds are paid out to the policy owner.

If Joe never changed ownership, his policy is still owned by Mary, meaning the $500k is paid to Mary.

Mary can decide where that money might go. Joe’s kids might get it or Mary might decide to share it with her three stepchildren as well—probably not what Joe wanted.

Needless to say, this is a far from an ideal situation. And it wouldn’t be hard to imagine an infinite number of permutations of this scenario that could make things even worse.

So this all boils down to the fact that, aside from insurance being important, setting up the ownership of that insurance, and tweaking it to suit changes in life circumstances, is probably just as important.

This sort of detail is the stuff a good insurance adviser will talk you through. We’ll help make sure that what you intend to happen, does happen if and when it’s time to make a claim.

Alex is our insurance expert in the office and would happily help out with all insurance questions you would have in regards to this article or insurance questions in general.

Alex Barendregt is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.