Save on your premiums the right way
When you start a family people tell you “never compare your experience or your baby with others”. I think it’s true for Life, Health and Income insurance premiums (nice segue for Kiwi Parent Magazine). If you’re comparing only the cost of insurances with others you’re almost never comparing apples with apples. Your needs and circumstances are likely to be completely different, and it’s something that can cause people to decrease or cancel covers they actually need based on a 5 minute bbq conversation.
That is my big caveat on this subject, everyone wants to spend less on insurances but you may need to rethink about how you prioritise insurance.
So here is how “Being Healthy” and having a good plan may help you save without sacrificing cover.
BEING HEALTHY – Physically
Halve your premiums with one step…. don’t smoke (or vape). Next.
Keeping in good physical (and mental) shape. When you get a “quote” from your adviser it’s actually called an “illustration” because it’s subject to change after the application. Your BMI, your medical history and your blood test results are all relevant factors to the insurers assessment as to whether they offer you “standard rates”, the original quote/illustration, or they “load” your premium. Loading is normally done by a percentage increase i.e. a 100% loading means you pay double, like a smoker and that’s reasonably common.
Proving you are tracking and maintaining good health can also earn you a discount.
AIA’s Vitality Programme uses your smart watch and an app to track your health and can save you money on your premiums. It starts with 10% off and builds up to 20% (Vitality does have a monthly fee so make sure you are saving more than that).
Health insurer Accuro keeps it simple with savings if you stay within healthy BMI ranges.
Check if your provider or prospective provider offers anything like that.
BEING HEALTHY – Financially
If you have good financial habits, meaning you have low debt levels and maintain a healthy emergency fund, you can save you big time on premiums.
You always want to make sure your debts are covered with Life and Disability insurances. So if you have low debt or you are able to clear that debt faster (e.g. paying off your mortgage faster than 30 years) your requirement for covers decrease. Remembering most covers increase with age so if you can get rid of unnecessary cover before they get too expensive you’ll save uuuge.
If you have anywhere from 3 - 6 months of expenses in your emergency fund you will have more options by covering part of the covers yourself (partial self-insurance).
Health Insurance: take a higher excess, if you have a $500 excess but could actually manage with a $4000 excess, you’ll save on premiums. The higher the excess, the lower the premium.
Income Insurance: selecting a longer waiting period (waiting period: the amount of time between the claim event and your monthly benefit being paid). The standard is 4 weeks, if you can extend this to 13 weeks your premiums could halve.
Home, Car, Contents Insurance: just like Health Insurance select the higher excess available and your insurer will decrease your premiums.
All of the above: means when you need to make a claim, you have the funds available in your emergency fund to cover the excess or waiting period. You must have that emergency fund to save.
The last tip is to save for next year’s premiums now. If you can pay your premiums annually in advance most insurers will offer discounted premiums. So whatever you pay in premiums fortnightly/monthly, put the same (or slightly more) into your savings over the next 12 months and pay your premiums annually.
There are other options which I will cover in later blogs including accelerated products, level premiums and work schemes.
Cheapest is not always best, you generally get what you pay for, but by having a good plan for emergencies can keep your insurance premiums from causing financial stress.
