Income protection insurance

A Quick Guide to Personal Insurance

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Insurance can get confusing. Huge policy documents, insider lingo, fine print everywhere. It’s supposed to provide peace of mind, but can instead just play havoc with even the sharpest samples of grey matter.

So, here’s a 101 guide to understanding your personal insurance.

 

In New Zealand, there are four things a person can insure themselves for:

 

1. Life

 

Why? To repay debts, cover funeral costs and give your loved ones the financial freedom to properly grieve.

 

Who? This pays a lump sum to your estate or the person of your choosing.

 

2. Trauma

 

Why? Give yourself space to recover, whether or not you’re off work for a prolonged period of time.

 

Who? This pays a lump sum to you if you are diagnosed with a specific illness.

 

3. Income Protection

 

Why? Unfortunately the bills still come in if you’re unable to work due to injury or illness. This will pay a percentage of your income (or mortgage repayments) until you’re able to return to work.

 

Who? This pays you a monthly sum.

 

4. Health

 

Why? If you need non-acute surgery, you can skip the public queue and go straight to a private hospital.

 

Who? This pays the medical professionals that are looking after you.

 

Finally, it’s important to ensure that your cover is relevant to your life. Here are a few examples of life events that may impact the relevance of your cover. If any of these apply to you, give us a call!

•          You have new additions to your family

•          Your kids leave home

•          You get married and/or divorced

•          Your job changes

•          Your salary changes

•          You have had any health issues (more than just a GP visit)

•          You have set up a new company or trust

•          You have bought or sold a property

No investment decision should be taken based on the information in this blog alone

The "What If?" and "Would You Rather?" Game

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When we’re young, we all feel invincible. Life is pretty good. Most of us have some disposable income and live it up. But there comes a time when we all need to ask the “what if” questions, says Debra Halton.

 

Sitting across from a young couple who had just purchased a home, I got them talking playing the old “What if …?” and “Would you rather …?” games. What if one of them got seriously sick, would the healthy one rather continue working in order to pay the bills or to have the choice to be there for their sick partner. What if one of them died? Would they rather be able to take some time off work or would their finances be such that they’d need to rush back to work?

 

Discovering what people need and what they really want and raising some very real “what if” scenarios is my job. And it’s important. I know lovely people who never had that question asked of them before tragedy struck. For example, last year, a father of four young kids dropped dead suddenly. Overnight everything changed for his wife and children. There was a long silence on the end of the phone to the insurance company when the wife realised there was only $50,000 of life insurance coming to the family. She was left to grieve and then bear the burden of housing, clothing and feeding her kids single-handed.

 

Some say that Kiwis don't’ like to discuss two things—sex and money—so I can hear the audible sigh as I write this piece on insurance. For, although it’s not sex, it’s most definitely about money. And our reluctance to talk about insurance is even more pronounced when it comes to insuring our lives: If I stopped people on the street and asked about car insurance almost everyone would say a resounding “yes”, yet if I asked about protection for you and your family if something tragic should happen, only 40 per cent would nod their heads.

 

So, I know these “what if” questions are hard, but the “would you rather” game gives us an opportunity to reflect on what we value most and how we can protect them best. The hope with good insurance is that you’ll never need to use it. But if you did, the people who matter most in your life will want to thank you for having the courage to confront those tough “what if” questions.

 

If you’d like a chance to throw around some “what if” scenarios and review your personal insurance, let’s grab a coffee—my shout! Would you rather have it black or milky and foamy? Perhaps soy or even a hot choc?

 

Debra Halton 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.