Financial News Roundup March 2018

1. Auckland Maori Hapu to provide free health insurance for its members. - NZ Herald

Auckland based Ngati Whatua Orakei has joined with NIB to provide its members free health insurance in an arrangement that is likely to cost around $3 million annually.  

2. Thousands of recently built homes covered by liquidated CBL Insurance. - Stuff.co.nz

The Insurance for thousands of recent homes covered for shoddy building practices could be put into limbo as CBL Insurance has officially gone into liquidation.

3. What went wrong at CBL? - NZ Herald

In a follow up to the previous article, the Herald looks at what factors surrounded the collapse of CBL and how it went from a trusted insurer to liquidation in the NZ marketplace.

4. Home Insurers crack down on Meth Claims. - NZ Herald

As overall claims for methamphetamine related damage increases year over year, insurers have greatly hiked excesses for meth claims and premiums to curb losses.

5. Kiwisaver fee drop 'missed the mark'. - Good Returns

A review of the default fees for KiwiSaver providers led to only two of nine major providers changing their fees in response.

6. Partners Life introduces a new range of level premium options. - Good Returns

Partners Life have introduced level premium (fixed premiums which remain the same until an agreed upon age) options for its suite of personal and business insurance products.

7. A bumper year forecast for mergers and acquisitions. - NZ Herald

Pent up demand following last year's elections may lead to a major year for acquisitions and mergers, industry insiders tip.

UPDATE: Smokers and Insurance - How Much You Can Save By Quitting

UPDATE: With the next New Year's cigarette and tobacco price increase about to take effect and plain packaging about to become mandatory throughout New Zealand, it's more important than ever to consider the possible benefits to your health and your wallet of quitting. 

Statistics estimate that 15% of adult New Zealanders smoke, or a total amount of around 550,000 people. Smokers in New Zealand have it tough in so many ways, and it's about to get even tougher. Not only are smokers mired in an unhealthy and destructive habit, every year this habit takes more and more out of them financially. Since 2010, due to new tax laws passed by parliament, the price of cigarettes and tobacco has risen dramatically.

A pack of 20 cigarettes has risen from around $13 to between $22-27 in 2017 (between $24-30 in 2018) depending on the brand of choice. With 10% tax increases set in law at least until 2020, smokers can expect that they will soon be paying upwards of $30 per pack or $1.50 for each cigarette. A pack a day smoker will be out $200 per week, a cost likely higher than all their groceries for the week combined.

In 2017, each of these set their owner back over $1 a piece. In 2018, the cost is set to rise yet again.

Unfortunately, that's not all a cigarette habit can cost. If you're a smoker and you have personal risk insurance in the form of life, trauma, TPD, income protection or health/medical insurance, you're paying a lot more in premiums than non-smokers are. This is because as a smoker, you are more likely to develop serious health conditions and thus, you pose a much higher risk to the insurer. How much more will a smoker pay? In some cases it can be up to double the amount of a non smoker of the same age.

The good news is, that if a smoker manages to quit, their premiums can be revised and changed down to a non smokers level if the smoker manages to maintain it for a significant period of time. For instance, if you quit smoking 12 months ago and are paying smoker premiums on your insurance, you will be eligible to apply for changes and have your costs significantly reduced. A pack a day smoker who manages to quit could easily save between $12,000-$15,000 a year through not having to pay for smokes combined with the savings on their insurance. That is enough for a significant vacation, a brand new car or many many shopping sprees. Even those who only smoke a pack or two a week could save around $5000 a year by cutting it out.

With the cost of the habit now sure to increase further in the years to come, now could be the time to dial it back or endeavour to quit entirely. Your wallet would definitely thank you for it.

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Tips to save money on your insurance #3

3. Review your insurance regularly.

Once you have insurance in place, its vital that you take the time to review your cover regularly. At Spratt Financial, our policy is to conduct annual reviews of our clients' insurance along with them to ensure that they really are getting the best insurance for them.

Things naturally change in life. Life changes can hugely affect what you need out of your insurance and what you need protected. Taking the time to review and not being afraid to make adjustments as necessary is crucial to getting the best deal on your insurance. As a guideline, you should try to review your insurance when the following events happen in your life:

- Getting married or divorced, or entering into a civil union.
- Having a child.
- Taking out a new mortgage or a significant debt.
- Paying off a mortgage or making significant progress to doing so.
- Beginning to take care of a friend or relative.
- Getting a new job or a raise.

Looking at these events can give you a good guideline as to when you should be reviewing your insurance cover. Even if you don't end up saving money on premiums, you can be more assured that your insurance will be covering your real current circumstances. That could save you a ton in the long run.

You can ask us for a free, no obligation insurance review at any time here.

Tips to save money on your insurance. #2

2. Consider your waiting period and/or excess.

Waiting Period: Increasing the waiting period on your insurance cover is one way to lower the cost of your insurance. The waiting period is the amount of time you must wait after fulfilling the conditions of your insurance before being eligible for the claim payment. For instance, with a 6 week wait on an income protection policy, you will have to wait 6 weeks after stopping work to become eligible for your claim payments.  The higher your waiting period, the more discounts you will get on your insurance premiums. Therefore, if you have sufficient savings to cover the wait period if something unfortunate does happen, a higher waiting period can be a great idea for savings in the long term.

Excess: For certain types of insurance like fire and general or medical insurance, you can select a higher excess to achieve the same savings. An excess is the amount of costs or damages that you must cover on your own before your insurance kicks in to cover the rest. A $1000 medical insurance excess means that you will pay the first $1,000 of any medical procedure you need and your insurance will cover the rest. We recommend taking a balanced approach between saving on premiums and having an affordable excess if something happens, but if you're taking a long term approach, increasing your excess can be a good move.

Not sure where to start? Ask us for a free and no obligation insurance review today.

Redundancy Cover: How it Works.

Redundancy Cover (also sometimes known as Loss of Job Cover) is a more specific form of income protection that will protect you from the loss of income that you could suffer if you are made redundant or lose your job involuntarily. As a more specified and less broad type of cover, redundancy cover is far cheaper in monthly premiums than general income and mortgage protection policies, making it a sound option for those who want to be protected but cannot afford the premiums for more costly Income Protection cover.

In general, payment will begin 30 days after you are made redundant or lose your job. From there, monthly payments will help you manage your expenses for a period of up to 6 months to allow you enough time to get back on your feet. Furthermore, you can still claim on your redundancy cover even if you have received a redundancy payment from your employer when you were let go. This will not effect the amount paid out or the frequency of the payments in any way. You can claim TWICE in total for any redundancy cover benefit, meaning that you are covered for a period of 12 months in total, as long as you have been employed a certain amount of time in between the two six month claim periods.

The sum assured of a typical redundancy policy will be calculated as follows:

- 40% of your income before tax.
- 110% of your mortgage payment.

Whichever of these figures is higher will be your sum assured, and when you claim on your policy that is the amount you will be paid each month to help you maintain your lifestyle while you look for the next job that's right for you.

One of Redundancy Cover's benefits is that it allows you the security to take the time to find the job that's right for you and not having to make impulsive decisions based on financial strain.

Unlike other forms of insurance, Redundancy Cover is NOT age related, and premiums will NOT increase each year due to age. This means that you will know that redundancy cover will always be affordable and will fit within your budget as the years go on.

Recently, we have had a client who was extremely thankful for the redundancy cover we had arranged for him. Out of the blue, he lost his manufacturing job after having only recently acquired a new house and with it a large mortgage. When he claimed, the redundancy cover kicked in and covered all of his mortgage payments for him, allowing the family to live comfortably off the income of his spouse. Without it, he told us, he would have been forced to lose his house that he had worked 15 years to be able to afford a downpayment for. The prospect of that rightly terrified him, and with a shortage of specialised manufacturing work in his region, it took him until the fifth month after his redundancy to secure new employment. Now, he has resettled in his new job, has kept his house and the family finances are in good shape. All it takes is a single thing to go wrong and he could have lost everything he had worked so hard for, we were extremely glad that he didn't. He was too.

Redundancy cover does work, and it is not expensive. Regardless of whether you have other forms of insurance or none at all, redundancy cover could be a very important boon to your life and won't set you back all that much. If you have any questions of just how much you'll pay, or you wish cover to be arranged for you, we can help. Just drop us a line anytime.

Defining Insurance Terms

A lot of the jargon and terminology surrounding insurance can be difficult for people not familiar with the industry to understand. Worse, many insurance companies or brokers use these terms expecting full knowledge. Here is the definition of some of the most important terms you might come across when dealing with insurance.

1. Policy 

An insurance policy is a contract between yourself and the insurer. The policy provides conditions that once you fulfill, you will receive payment from the insurer in the amount agreed to when the policy is taken out. For example, a life insurance policy is an agreement between you and the insurer to pay a certain amount (called the sum assured) in the event of death. A Total Permanent Disablement Policy will provide payment once you fulfill the conditions of being unable to work due to illness or disablement for longer than a specified period of time. And so on and so forth. An insurance policy is what you pay premiums for as well as what you make a claim upon.

2. Premiums 

The price you pay to keep a policy in force. Most premiums are paid monthly, and the amount depends upon the type of insurance, the sum assured and other factors such as your age, your health or the amount of people covered by the policy.

3. Claims 

A claim is the action you take when you have fulfilled the conditions of your policy and wish to be paid out the sum assured.

4. Pre-Existing Conditions 

A pre-existing condition is a physical health or mental health condition which were already present at the time of taking out the policy. Pre-existing conditions can be excluded from your insurance coverage or can cause your premiums to be higher, as the insurance company is taking on a higher risk by insuring you.

5. Exclusions

Events or conditions that are not covered by your insurance policy. For example, in many life insurance policies there is a suicide exclusions whereby death by suicide will not result in the insurance paying out ie. it is 'excluded' from your cover.

6. Insurance Broker

An insurance broker is different from an insurance company in that a broker does not sell insurance to you directly. A broker searches the marketplace on your behalf, taking your needs and your individual circumstances into account to secure the best possible deals on the insurance policies you are looking to take out. A broker's job is to work for the client and work for their interests and not the interests of the insurance companies. Our company, Spratt Financial Services is a team of insurance brokers, operating under this definition.

7. Waiting Period 

The waiting period is the amount of time (agreed upon at the time of taking out the policy) which must pass after an event before you can collect your insurance benefit. For example, in an income protection policy with a waiting period of 4 weeks would mean that you will receive your agreed upon benefit from the policy 4 weeks after being rendered unable to work by illness or disability.

8. Living Benefits 

This is a feature that can be included in life insurance policies that allows you to receive payment on your life insurance before you die under certain circumstances. Usually, these involve diagnosis of terminal illness such as cancer or the need for specialised care.

9. Waiver of Premium

A feature that can be added to an insurance policy that will ensure that your insurance remains in place and active if you fail to make premium payments due to illness or disability. The waiver of premium will usually remain in effect for as long as you are disabled and unable to make premium payments. This feature will cost an additional premium.

10. Qualifying Event

An occurrence that triggers your insurance payout or claim. For instance, a death in the case of life insurance or a surgical procedure in medical insurance.

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Sunday Star Times: Controversy over Higher Life Premiums for Depression

Today on the front page of the Sunday Star Times (June 23rd 2013 edition), the publication is featuring an article by Kirsty Johnson, detailing the plight of TV presenter Sonia Gray, who sadly struggled with post natal depression, battling her way out of her condition to find that she would then have to face higher life insurance premiums for having her psychological condition.

"I was shocked," she said. "A lot of people have mental health issues around pregnancy. It's often hormonal," she said. "The insurer's reaction was bizarre."

Sonia Gray, TV Presenter and Mother.

This has given rise to a great deal of understandable reaction from both the public, the insurance industry and mental health professionals. Most people understand that it is a fact of life that insurers are private entities, and attempting to secure insurance when health is faltering with ailments, disabilities or long term health conditions will result in higher costs or refusal, in the interest of both the insurer and other clients who would lose their cover and security if the insurer was forced out of the marketplace due to excessive claim costs. However, mental health and depression is a much different entity to physical health problems and disablement.

"Dr Sara Weeks, a maternal psychiatrist... said about 16 percent of New Zealand women were believed to suffer some kind of pregnancy depression... Auckland University senior lecturer in mental health nursing, Anthony O'Brien, feared the policy could lead to complicated diagnoses as doctors tried to avoid using the 'depression' term". 

Mental Health conditions are a very complicated issue, which a panoply of treatments and divisions within the psychology profession on how to approach, understand and treat ailments such as depression. Whilst this is the case, a perception of an across the board policy forcing depression sufferers to pay more will understandably lead only to backlash against the insurance industry, feeding into images of money grubbing ahead of humanity. From our experience of dealing with the insurers directly, this is not fully the case. Whilst it is true that insurers do load policies due to depression, this is mostly in the case of severe depression and the client's personal circumstances are looked at in each case before a decision is made.

Even so, this case demonstrates that sometimes the insurers can get it wrong. The insurers obviously must have a constant and consistent balance between maximising profitability to continue to provide a service that is no doubt valuable and worthwhile to the New Zealand public, whilst having compassion and human interest at heart, and in this instance, perhaps they have been erred too much towards the former. People should be given the benefit of the doubt, and in the absence of conclusive evidence of higher risk, it is unfair to burden them further with policy loading.

What are your views on this controversial issue? Should mental health conditions be treated similarly to physical ones by the insurance industry? Is there really more of a risk of death for post natal depression sufferers, and should this be taken into account? Most importantly, what more can be done to combat the problem of mental health in New Zealand and aid the sufferers of depression, and should the insurance industry have a role to play, however small, in this regard?

Read the original article by Kirsty Johnson, courtesy of Stuff.co.nz.

More information and help for sufferers of depression.  

Feel free to ask us about depression and how it might be affecting your insurance.

What is Mortgage Instalment Insurance?

Most people are aware of the main types of insurance related to risk (life insurance, health insurance, income protection), but there are equally valuable but lesser known types of insurance which can be of great use in protecting your assets for a cheap price. In this case, mortgage instalment insurance can specifically cover mortgage repayments, safeguarding your home and your lifestyle in the face of unforeseen events.

- Mortgage Instalment Insurance pays your monthly mortgage repayments in the event that you become disabled due to illness or injury. Mortgage Insurance gives you four different payment period options each with different premium costs. The options are to have the insurance pay your mortgage repayments for a period of 2 years, 5 years, until the age of 65 or until the age of 70. 2 years will result in the cheapest monthly premiums, 5 years will be more expensive, and payments until the age of 65 or 70 will be the most expensive options.

- There is also an option to choose Redundancy Cover, which also covers your payments in the event that you are made redundant from your job. Redundancy cover will meet your mortgage payments for a period of six months to allow you adequate time to transition to new employment.

- Mortgage Instalment Insurance will pay 110% of your monthly mortgage repayment, calculated at the time of taking out your insurance policy. This is designed to cover any interest rate rises, as well as additional expenses such as land rates.

- If your personal circumstances or your repayment amount changes, you can contact us or your insurance provider to re-assess your cover.

- Mortgage Instalment Insurance is a more specified form of insurance that only covers mortgage repayments in the event of illness, injury or redundancy. Because of this, it is a considerably cheaper option than taking out more general lump sum insurance cover. Your home is the most important asset you have, and mortgage instalment insurance offers a simple and cost effective way to ensure your home will not slip from your hands in the event of unforeseen circumstances. We think it is well worth considering.

If you are interested in securing Mortgage Instalment Insurance or you have any further questions on if this type of cover is right for you, don't hesitate to get in contact with us anytime and secure your mortgage at the lowest possible price.

Get in contact today: enquiry@sprattfinancial.co.nz

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Your house is simply too valuable to lose.