The Benefits of Total Permanent Disablement Insurance

This is our second post dealing with Total Permanent Disablement Cover (TPD), the first of which, a basic introduction to what the cover is, the definition of accelerated and stand alone policies and what constitutes permanent disability can be found here.

When looking at different forms of insurance, they each tend to have their own unique benefits and drawbacks. Life insurance is widespread and important, yet only pays claims upon actual or medical death, rendering it unable to cover critical illness and disablement that takes you out of your work and makes you unable to earn money. Income protection does this job but sometimes involves more costly premiums. Health insurance will cover your medical treatments and expenses but will not supplement any lost income your medical conditions could cause.

When people learn about TPD, they typically wonder if its really necessary or beneficial. What does it offer? Is it worthwhile to have, even if I already have life cover and/or income protection? What differentiates it from other forms of risk cover? What are the benefits and drawbacks to this lesser known form of insurance?

A common response would be that a drawback to TPD is the unlikelihood of suffering a condition that would result in you meeting the necessary conditions to make a claim (described in more detail here). To some extent, this is true. It is less likely that you will ever need to claim on TPD than income protection or health insurance. However, it is not rare enough that the possibility can be readily dismissed out of hand. From the calendar year spanning July 2011 to July 2012, Sovereign paid out over $2.5 million of TPD claims, the highest proportion being for Neurological conditions and Cancer. So, it does happen and it may be worth having. At Spratt Financial, we have personally seen a few TPD claims over the years for substantial amounts, in one case over a million dollars, which formed an income source sufficient to provide for the rest of the client's life.

Also, the more infrequent nature of Total Disability is taken into account in the cost of the insurance, making it an even more worthwhile proposition. Because conditions resulting in permanent disability are rarer, TPD cover can be taken out for a far cheaper cost than other forms of insurance, and the monthly premiums are typically very affordable. Our company founder believes strongly in TPD insurance due to his overseeing of several cases and tries to encourage our clients to take it out wherever possible, as it is very seldom a financial burden and could result in hundreds of thousands of dollars being paid in your moments of direst need.

Overall, even though TPD is a more overlooked and unknown form of cover, it actually has less drawbacks than some of the more popular forms of insurance. It can be useful, it can completely remove your financial worries for life if disablement does strike and it is generally not overly costly. We personally think TPD insurance is generally a good thing to have, and if you agree, we can definitely help you out. Don't hesitate to drop us a line at enquiry@sprattfinancial.co.nz if you have any questions.

Read our first post on TPD.

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Income Protection: Unimportant or a Necessity?

"Online research by insurer AIA last year found that 87 per cent of (Adult New Zealanders) have car insurance, 50 per cent life insurance and only 11 per cent income protection insurance."

After reading such figures, outlined in an article by Diane Clement in an article for the NZ Herald, it raises the immediate question; does this reflect the fact that income protection is less important to have than either car or life insurance? Or is it something else?  Could it reflect the fact that the benefits of car or life insurance are generally well known and understood and cover such as income protection is more unknown, more marginalised, or thought of as unnecessary?

We can often foresee the fact that if we were to die, we would leave behind an uncomfortable financial situation for our family or dependants. After all, its hard to earn a living when you've passed on, and that's a fact that's as clear as day. Hence we see a fairly high percentage of New Zealanders find life insurance something worth investing in. Even more of us can see that car accidents are a real and viable risk. We see them every day on the news, many of us have experienced them first hand and hence we see car insurance as a necessity. The need for income protection however, is perhaps not as immediately obvious.

In our minds, critical illness can sometimes become an 'all or nothing' type proposition. Either we are healthy and able to earn a living or we are struck down critically and pass on quickly, at which time our life cover will provide for our beneficiaries. Unfortunately, the stats aren't kind to these assumptions. As covered more fully here, 94% of deaths in New Zealand only come after a protracted and extended disablement process, during which the sufferer will be unable to work or earn a living, and during which basic life insurance will not be able to be claimed upon. This is the time though, that an income protection policy WOULD kick in, replacing your lost income and making sure your expenses are covered as you go through the recovery process.

 "People will often take life insurance cover and reject income protection insurance as "too expensive", says industry analyst Russell Hutchinson of Chatswood Consulting, even though it is the more valuable cover. They underplay their chances of having an accident or falling ill."

This seems to be the sticking point. We regard death as inevitable and so a large percentage of us prepare for it with life cover. But when it comes to our health, we tend to think that things will largely remain consistent, squared and away.

"Other common reasons that people don't take out income protection or related insurances, says Cave, are that they:

* don't know what it costs
* get confused by analysing too many policies, or
* fear they won't be covered for an illness they've suffered in the past."

 All these issues can be fairly easily dealt with and worked through. In our practice, we've seen a lot of cases where income protection has really helped out our clients, similar to the one cited in the original article:

"A 47-year-old customer who suffered a stroke while playing Pictionary. The man couldn't return to work in his profession as a rock driller for the rest of his life. Thankfully his income protection insurance will support him financially until retirement."

If you are financially able, an income protection policy is something that we heartily reccomend. If the costs are prohibitive, and you find yourself having to choose between income protection and other insurance cover such as basic life, trauma or permanent disablement we advise definitely taking the time to check out the benefits offered by each and considering your personal needs, or ask us and we can help you sort out which cover is best for you.

According to the statistics, a working couple has a 1/3 chance of one of its members suffering a critical illness, and with only 11% of New Zealanders having income protection, a scary amount of people are going to find themselves in need of cover and not having it. Perhaps its something worth considering? Stay tuned in the near future for an article describing in more detail the possible types of income protection, their features and possible benefits. 

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Read the original article here.

Who has the Best Home Loan?

When home buyers make the decision to buy a home, one of the first and foremost things on their minds, save for those few fortunate enough to have saved enough to buy outright, is 'who has the best home loans'? Factors such as interest rates, lending conditions and reliability all play a major role in answering that question, but with over 50 established lending sources on the market place including banks, credit unions and finance companies, finding out can involve a lot of intensive research, meetings and questioning; certainly an exhaustive process.

To begin with, there is a great resource, courtesy of our friends at Good Returns, which provides a continually updated comparison of interest rates for all the major lenders, all in one place. It also shows a history of changes and can be filtered by type of lender (Major banks, minor banks and non bank lenders) and can also show changes from the previous day, one week, two weeks, four weeks, three months or six months. There is also a feature where graphs can be plotted showing visually a comparison between lenders with changes over time.

The latest home loan rates can be found here. In terms of interest rates, this is a great resource to use.

Obviously personal circumstances play a role in what you're looking for out of a home loan. Knowing this, simply looking at interest rates and watching television ads extolling the virtues of certain institutions can be a tad misleading, as they are generalised to appeal to a wider audience and not you specifically. Plus, some calculations can be complicated things, and it can be confusing as to which loan will really pay off for you over the entire course of your loan repayments 5 years or more down the track. Each of the major banks has their own calculator applications designed to answer these questions, but again, comparing them all and taking into account all of the minutiae can be a daunting task, for which there is no simple table or application to complete.

If you want to take some of the legwork out of your home loan research, Mortgage brokers can be a helpful resource. They can either secure a loan at the best possible conditions for you specifically or determine which loan is best based on all the factors you need taken into account. A small difference in percentile points here or some misunderstood fine print there and you could end up paying hundreds or thousands more than you could have been if you covered all your bases from the start. Auckland in particular has experienced a rapid increase in the cost of housing, making it even more vital that you don't waste money when repaying your mortgage.

Overall, we hope the resources online help, but if you require more information or think you could benefit by having your bases covered when it comes to your home loans, make a free, no obligation enquiry to our lending department anytime at enquiry@sprattfinancial.co.nz

Visit our official website for more information.

View the contact details and bio of Jonathan Parsons, our mortgage specialist.

Insurance Advice: Life Policy Ownership - How to Save You Stress at Claim Time

Someone you love passing away is perhaps the greatest struggle and pain that a human being can endure in this life. Unfortunately, the pain of losing a loved one can't be abated, but in our experience dealing with life insurance claims for people who have passed on, there are things people can be unaware of regarding life insurance which can lead to a prolonged and stressful claim process, leaving families waiting and stressed out in their already difficult time. This article is designed to educate, to make sure that you and your loved ones make things easier on your life insurance beneficiaries when you pass on. This can be done through adjusting policy ownership details.

To make it clearer, let me give you two examples.

John Smith has a life insurance policy, in the amount of $250,000. He is listed on the policy as the sole policy owner. When he passes on, the claims process begins. Unfortunately, the life insurance company is forced to wait for the executors of John's estate to have the will probated through the courts to determine John's desired beneficiaries and pay out the $250,000 to them. This process could take upwards of 2-3 months. Even worse, if John has no will at the time of his death, an even more complicated process ensues that will drag on even longer and could even, in the worst case scenario, see his policy benefit people he did not intend for it to!

In the second scenario, John Smith has the same life insurance policy ($250,000). In this case though, John had determined that he wished his wafe Stacey to be his beneficiary in the event of his death. In this interest, he had his wife registered as an additional policy owner. When John passed away, the insurance company immediately knew the intended beneficiary and was able to pay out within days to his wife Stacey. This avoided the lengthy probation process entirely. All it took was the consent of both John and Stacey and their signatures. The ownership details, in terms of the insurance claim, supercedes anything put into the will, allowing a quick and easy transfer of the $250,000 to his wife, supporting his family in the most quick and easy manner possible in their hardest time.

If you have life insurance and you want to make things as easy as possible, think seriously about including your intended beneficiary as a policy owner. This will ensure that in the event of your death, months of wrangling and procedures are circumvented and the money gets into the intended hands from the insurer. We have heard some real horror stories in our time, of entire estates falling into the wrong hands or families forced to give up their lifestyle due to being forced to go too long without their insurance claim after the death of the family breadwinner. We hope that knowing this helps, and as always, if you have any questions about this process or would like to know more, we're available anytime.

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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.

Key Person Insurance Cover

Key Person Insurance is a form of risk insurance that is designed to help out your business if one of your key employees is rendered unable to work due to health issues or disability. This type of insurance cover can be useful for businesses who rely or depend on one or more key employees to maintain profitability. For instance, in our case study of Justin and ABC Engineering, Justin held a key position within the business, with a large proportion of the company's monthly income attributable to his relationships with clients. If you have key person cover, the devastating loss of someone like Justin to illness or disability can be mitigated by a monthly benefit to the business, designed to cover the loss of income your insured employee would have brought you.

Is Key Person Cover Useful?

ACC Research, conducted in June 2006, revealed that a huge 67% of small or medium business closures in New Zealand are due to the injury or disablement of a key person or employee. The same study showed that only 8% of business closures in comparison were caused by the fact that the business became unprofitable or no longer viable, showing that by far, injury or illness is the biggest risk to small business in New Zealand.

Furthermore, we have previously discussed the statistics regarding critical illness in New Zealand, which are applicable here too. 51% of males and 33% of females will suffer a critical illness before the age of 70, and if or when it happens to one of your businesses critical personnel, having an assured monthly flow of income to cover it can help your business survive, recover and prosper again.

How does it work?

- When the cover is taken out, the amount that is paid to you monthly in the event of your employee being rendered unable to work is agreed to, so that you will know specifically the level of benefit you will receive. This amount is of course, negotiable and it can be set based on your personal needs.

- The benefit itself is typically payable for a maximum period of two years.

- It is possible to lower the monthly insurance premium you will pay for your Key Person Insurance Cover by adjusting the length of time you have to wait after your employee is incapacitated before your payment kicks in. The longer period of time this is, the lower your monthly premium will be.

What other features can Key Person Cover Offer?

- Recurrent Disability Allowance: If the key person or employee covered suffers a relapse of the same condition within 6 months, your wait period can be waived so the benefit kicks back in immediately where it left off without a further wait period needed.

- Additional Payment in Case of Death: If the key person or employee covered sadly passes away while you are receiving your monthly key person insurance payment, your business can receive an additional payment of 6 times the monthly benefit to help you cope with the tragic circumstances.

- Changes can be made at anytime to reflect your current needs, and your insurance cover, waiting periods, amount of employees covered can be reviewed and changed at anytime, giving your cover flexibility as your business changes.

If you need more information, have any questions or you would like to get your businesses employees covered, post a comment below or contact us at enquiry@sprattfinancial.co.nz.

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Avoiding the pitfalls of Kiwisaver.

I came across this article online when browsing. It's a very interesting look at the double edged sword of managing your Kiwisaver without professional advice, and the attitudes of everyday Kiwis towards Kiwisaver.


Original Article by Susan Edmunds Here

"Massey University's Claire Matthews is speaking at today’s New Zealand Capital Markets Symposium, at AUT, about her paper on KiwiSaver member behaviour, which looked at what drives people to choose certain funds over others. She said some of the research results were surprising.

Previous studies have shown that savers opted for bank funds because they could see their KiwiSaver balances online. But Matthews’ study said it also seemed to prompt people to move away from banks. “It’s odd. We’re speculating that it’s because they are able to check the balance, they can see when there is a downturn, they’re not happy and go somewhere else. It’s not a very good way of managing your KiwiSaver.”

She said it might be a sign of KiwiSavers’ inexperience. “It will be interesting to see whether that continues or whether it changes as people become more used to KiwiSaver and seeing ups and downs.”

Providers’ fees were having a significant effect on which funds KiwiSavers chose to put their money in, Matthews said. But she said it was unclear whether they completely understood them. “People are going to be looking at the fees, whether they’re making good comparisons or not is unclear…. Sometimes you pay higher fees for higher returns.”

Matthews said savers were definitely not getting enough advice. “KiwiSavers are disadvantaged because they are making decisions that are long-term and have the potential to have significant impact on their retirement lifestyles but they are unable to access the advice they need to ensure they are making the right decisions.”

As we can see, there are many aspects to consider with Kiwisaver, some becoming fairly complex. When faced with the challenges of going it alone with Kiwisaver, people can understandably make spur of the moment decisions that could affect their long term financial future. Kiwisaver is designed to be a long term savings programme, and previous research has demonstrated that not enough has been done to help Kiwis understand the aspects they need to know to get the most out of the programme. One previous study for instance, has shown that over 30% of Kiwis get their Kiwisaver advice from their own family or friends.

Kiwisaver can be a great long term boon to your future in retirement, and that's why we're here to help with professional Kiwisaver advice. Our Investment Specialist Ross Wallace offers market leading experience with Kiwisaver and can simply and effectively help you make the best decisions for your Kiwisaver needs, taking your unique financial circumstances into account. He can bring clarity to a lot of the confusing issues surrounding Kiwisaver and help you get the most out of it.

Don't hesitate to ask us your Kiwisaver questions below, or at enquiry@sprattfinancial.co.nz.

The official site of Kiwisaver.

Our official Investments Page. 

Ross Wallace's Profile and Contact Details.

Funny Insurance Ad Video

When things go wrong, they go very wrong... ;)

Placing Your Southern Cross Health Insurance On Hold While Overseas

From conversing with a lot of our clients, we have found that many of them are unaware that it if you are leaving New Zealand for a protracted period of time (up to 12 months), you do not have to cancel your Southern Cross Health Insurance Policy. You can instead place your policy on hold, to be resumed when you arrive back in the country, saving yourself considerable time and stress in cancelling and reestablishing your health insurance. Also, if you have to cancel your insurance, you will also lose cover for any pre-existing conditions you may have when you are re-insured, giving a good impetus to put your policy on hold rather than cancelling it altogether.

Here is all the information, terms and conditions from the Southern Cross Health Society.

"You can only place your policy on hold if you are travelling overseas,

You must have completed one year's continuous membership since the date you joined Southern Cross or since the end of your last on hold period.

You must place your policy on hold before leaving New Zealand.

You must pay premiums up to the date you leave New Zealand.

You can only place a policy on hold three times per policy lifetime.

Two months is the minimum on hold period for a policy.

12 months is the maximum time a policy may be placed on hold for.

Reinstating your policy.
If you return to New Zealand within two months, your policy will be reinstated from the date it was placed on hold. Premiums will then be due for the time you have been away.

If you return to New Zealand within 12 months, you need to contact us within 30 days of returning to New Zealand. You will need to provide documentation showing your dates of departure and arrival.

If you are away longer than a year, you need to contact us within 30 days of your 12 month on hold period to reinstate your health insurance. You will need to provide documentation showing your date of departure.

Premium payments will start again once your policy has been reinstated.

If you don't make contact you may have to rejoin Southern Cross as a new member. This means any pre-existing conditions won't be covered and your current plan type may not be available."

If you have any further questions about placing your policy on hold or about insurance in general, contact enquiry@sprattfinancial.co.nz for more information.

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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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