Lock-down may provide an opportunity to get your ducks in a row
Whether it’s distraction or because you now have the time to get things sorted, people are looking at their budget, mortgage, KiwiSaver, savings and insurance. I can help with the last one today - I’m all set up with my home office and access to your preferred video calling software. But if you want to come prepared then here are a few things you need to follow.
Debt, this should be the biggest piece of the puzzle in terms of getting your personal insurances in order, especially for Life Insurance. As you’re likely taking the time to look at your budget you probably have an idea of your current debt levels, and what portion of that you will be keeping long-term.
Calculate all your debt both long and short-term to a total figure. Tip: while knowing what your Student Loan amount is can be helpful for budgeting, do not include this in the calculation as this debt is forgiven at death.
You now need to consider what other functions of your life now and in the future need to be covered. Examples of these could be: any replacement income your partner may require, an education fund if you have dependants, or a funeral budget. Add these costs into your calculation above.
Deduct from that what assets you have that can be easily realised should anything happen to you. That would be your KiwiSaver balance (you can probably see already why now is a good time to review), any cash savings, shares or bonds.
Total debt (not including student loans) + future expenses - realisable assets = Cover Amount
The portion you will require for more than 10 years you should consider putting on level premiums (as much as is affordable).
Health Insurance. This is a great time to see what type of cover you have and how it works. Have a look on your provider’s website to get the latest details of what is included in your policy as this could have changed from when you took the policy out. It’s probably a good chance to look into whether your insurer will cover any COVID-19 related illnesses.
Your excess level is key here, what could you afford to pay out of pocket if you suffered serious illness or injury? That’s probably where your excess level should be. It’s the reason that those with high incomes would generally be advised to take a higher excess which makes the premiums much cheaper and they can easily afford a few thousand dollars should they need it.
Check if your kids are on your policy. The process for getting private health insurance put into place involves a deep dive into your personal health history, and providers are quick to apply exclusions to any pre-existing conditions. So getting your kids (or other dependants) added your cover is very affordable, and it means they can take over their cover when they leave the nest without the worry of exclusions or loaded premiums. Make sure they do take over their cover, otherwise they may well be jeopardising a clean private health policy, have to re-apply and end up with a bunch of exclusion applied to the cover they need.
Income Protection. You probably don’t have it, you should, but you don’t. This should be the easiest product to sell but it can be seen as expensive and therefore people choose to cover their life and health only. But put it this way, the likelihood of your house being burnt to the ground in extremely unlikely, yet you wouldn’t dream of not insuring it. Whether the bank required you to or not. Unless you are heading towards retirement then your income is worth a hell of a lot more than your home and is likely a fraction of the price to cover… so contact me today and get your most valuable asset insured.
For those who do have income protection in place,prior to COVID-19 we’ve had a massive period of global economic growth which means if you’ve had income protection for a while the cover amount may need to be updated to reflect your current earnings. Check your providers website and check how the benefit amount is calculated which is likely somewhere from 60%-75% of your gross earnings.
Your policy may have a benefit included that allows you to raise the benefit amount without having to go through a new health declaration. Have a good hard look through this.
This is the bare bones, and only scratches the surface of what you need to look out for. Your circumstances will be unique to you, so get in touch with me today and we can discuss what’s important to you - that will guide us to the cover you need.
Stay Safe
Pat
