Is Your Current Insurance Sufficient?

After 20 years working in the Insurance industry, there is one thing about insurance of which we am absolutely convinced. Insurance works best when it is used as the funding for a plan that will protect a business, family or estate that is confronted by the disablement process. If you already have an insurance package and you want to know whether your insurance package will really be sufficient for your needs, here are the questions you should know the answers to:

What Will You Need The Cover For?

Specifically, use a pen and paper and write down what the claim proceeds will be used for when they are paid out. If you can't do this now before tragedy strikes then you may be facing trouble later.

Will You Be Able To Claim Soon Enough?

Death cover pays out in the event of actual or impending "medical death". However, we know that 94% of all deaths are due to medical conditions not accidents and 65% are due to degenerative medical conditions such as cancers, heart disease and strokes which can kill slowly over what may be an extended period of time. During this time, unable to work and unable to support yourself, your family or your business, you will be facing tremendous financial strain which your insurance may not cover for. Will the bank or your creditors wait until you are terminally ill before your death cover pays out? This is perhaps the most crucial consideration to take into account when assessing your insurance. We can help you ensure that you are fully covered financially in the face of these worrying statistics as unfortunately, basic life cover is most of the time, simply not sufficient.
 

Is It Enough Of A Claim?

It may sound strange, but a $250,000 insurance claim may not be enough to repay a $250,000 mortgage even assuming you want to repay all of it. You may have additional interest payments, penalties for being in arrears and you may need to pay a Solicitor, Trustee or your Accountant to carry out these transactions for you.

Do You Have The Right Insurance?

This applies to the type of income protection policy you may or may not have, what your health insurance actually covers or the way that permanent disability or critical illness components are structured within the overall portfolio of insurance. These two components may or may not reduce the remaining life cover once they have paid out which could create major problems at the very end of the disablement process.

Even assuming that you or someone close to you will be physically, mentally and emotionally capable of applying the claim proceeds to the predetermined targets is not supported by our experience of dealing with over 160 claims.

What is the best way of answering these questions fully? Use our experienced professional advisers to not only design and review the underlying plan, but to execute it and carry out the tasks they are best suited to handle. If you don't have a plan now, prepared with clear-headed purpose, then any insurance you do have may well be insufficient or not adequately fit to your unique needs. Use our experienced professionals if you need guidance or advice.

For more information on how our team of advisors can assist with managing your insurance program, contact us by calling 09 307 8200 or by email at enquiry@sprattfinancial.co.nz.

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Case Study: How you can be protected from the effects of critical illness.

Although the names have been changed, this case study about Justin and his business is a real life case from our archives. It helps to highlight the impact that having robust, accurate advice and insurance made when Justin, the company’s managing director, was diagnosed with a terminal illness. It also serves to highlight the impact and necessity of a good, specifically tailored insurance plan can protect your hard work when unforeseen events arise.

  

•          Justin held the key position of Managing Director of ABC Engineering, a Wellington based company specializing in production services.
•          ABC Engineering employed a total staff of sixteen workers, and had an annual turnover of $3.9 million.
•          Justin’s role also encompassed establishing and maintaining critical client relationships. A large portion of the company’s income was directly attributed to Justin’s relationships with several major clients.
•          The company had estimated the amount of time needed to effectively replace Justin’s critical business role at six months.

The Disability Claim

When Justin found himself unable to work due to his illness, his salary from ABC Engineering was discontinued. In the absence of the specially configured protection from Spratt Financial, he and his family would have found themselves unable to support themselves through their trying time. Thankfully, Justin had enlisted us to provide him with protection, and our tailored cover ensured that:

•          A disability claim was paid after only four days for five weeks (hospitalization benefit) and was started again after seventeen weeks, at the end of the waiting period.
•         A personal income of $9,250 per month was paid to Justin so that his family was supported financially.
•         No financial evidence or complicated procedures were required for the claim.

The Trauma Claim

Within 26 days of initial exploratory surgery in July 1993:

•          ABC Engineering received $350,000 which cleared all critical debt, covered revenue for three months and provided recruitment costs.
•          Justin’s family received $160,000 which cleared all debt and created an income reserve of $56,000.

The Permanent Disability Claim

21 months into Justin’s ongoing illness:

•          The business received $550,000, which gave them capital to reinvest into maintaining their competitive edge in the marketplace.
•          Justin’s family received $150,000 which safeguarded his daughter’s education and provided a significant cash reserve for his family.

Terminal Illness Claim

•       ABC Engineering received a further $300,000, creating further revenue for the business.
•       Justin’s family received the remainder of its entitlement; $1,026,000 in total, which paid financial expenses, professional fees and created a significant capital reserve for family income.

During that time, and to this day, the following people kept their client, ensuring that that the benefits of our protection extended outside of even Justin, his family and his business:

•          Justin’s accountant.
•          Justin’s solicitor.
•          Justin’s financial planner.
•          Justin’s bankers.

The insurance that we provided formed a key part of ABC Engineering’s survival plan. Because of the protection we tailored, Justin’s company was able to command its own destiny by being able to control debt and having the funds allocated to protect the future prosperity of the business. The key point about this case is the benefits that having a tailored plan extended not merely to Justin himself but to his family and to his entire business and employees. At the end of the day, we were happy to help and even happier to see that what could have been a calamitous time was made easier for Justin, his family and his business.

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