Why do we have Insurance policies? This isn’t a trick question, but asking it will get different responses for each person’s situation. Whether it is to look after the family once you are gone, provide an income if you are unable to work due to accident or illness or to replace goods that may get damaged or stolen, insurance is set up to protect you from something that might happen! The attitude of “It won’t happen to me” may be the reason that while more than 95% of homes and cars are insured, only 57% of New Zealanders insure their lives and only around 1 in 5 have any form of insurance to protect their household income.
But the key thing here is that when looking at Insurance options you have to be aware that the cover is for what will happen in the future and you shouldn’t be surprised if the insurer says they won’t cover you for something you’ve already experienced. Many people only start to think about some forms of insurance cover if they sustain an injury or have experienced some type of medical drama (That doesn’t mean watching an episode of Shortland Street!). Often the insurer will place an exclusion on a policy meaning that if you already have an issue that’s been treated in the past, they won’t pay out should you develop something that can be linked back to the original event. Waiting until you’ve developed a problem before seeking insurance to cover it is the classic example of locking the stable door after the horse has bolted. On one occasion we were actually approached by a person requesting health insurance because they had been told that they would need some treatment that was going to cost a significant amount of money. Unfortunately we had to explain that as investigations had already been carried out, it was not going to be possible to get the type of cover required but we were able to provide some alternative options to protect them if something new were to develop later on.
That is why, despite the fact that we may feel bullet-proof and indestructible in our 20’s and 30’s it is better to set up your insurance at that younger age as not only will you be able to be covered for a wider range of conditions, but ultimately, you may be surprised at the lower cost of your premiums as you get older.
Working on a comparison of the costs of insurance between a 30 year old and 45 year old Male non-smoker with Life Cover of $400,000, Trauma cover for $100,000 and mortgage protection to provide $1800 per month in the event of illness or accident there is a difference of $70 per month in the initial costs. While you may think that doesn’t matter much now, due to the higher likelihood of claims being made by the 45 year old after 10 years (i.e. when our examples ages are 40 and 55) the difference has stretched out to $308 per month and the difference in accumulated costs starting from a higher starting point will only get wider. We have clients in their late 50’s who have recently purchased their first home but due to the large cost of premiums can’t justify the expense of insurance in their budget, leaving their home at risk if something were to happen to either of them.
The same goes for any type of redundancy cover. Once you hear that there may be a down-sizing or restructure of your company, the opportunity to take out the cover will have passed. It’s no good “forgetting” to mention it when the Insurance proposal is being completed either, as there will be enquiries made by the insurer at claim time and the benefit will not be paid due to non-disclosure if it turns out that the likelihood of redundancies had been communicated previously.
Insurance is there to provide us with a ‘Plan B’ should the worst happen, and the best way to do that is to talk to an adviser now about what you feel is most important for you to protect. Don’t wait until it’s too late or too expensive to get the type of insurance you need.
