10 Oct Eight insurance myths that can hurt you and your family

Myth 1: Most insurance companies and their products are roughly the same

They are not.

We may think that all insurance products and insurance companies are the same but they are not –far from it. We have thousands of client’s right throughout New Zealand and constantly get new clients coming to us looking at reviewing their existing cover to suit their circumstances.

When we take a good look at what insurance they currently have and what the client tells us they thought they had, we are constantly amazed. Many people come to us who are covered with the bank insurance products to eventually find out they have been given the wrong advice, the wrong products and in many cases have been given watered-down products.

Sometimes, this is not the company’s fault because that is all they have to offer, but in many cases, it’s just straight out terrible advice and not listening to or understanding the client.

For example, company A’s trauma product may have 63 listed traumas, whereas company B’s product has only 12. They may cost the same or one may be cheaper by a small amount, but look at the difference in coverage.

Many clients pay their premiums for years for insurance products they think they are covered for or products that won’t pay up when they claim because they simply were not covered to the extent they thought they were.

How do we find the best products and companies? We have access to all the major insurance companies who are constantly upgrading each product to ensure the best products are in the market for the client.

We also have access to bank products in New Zealand, and we have the opportunity to use independent research companies that compare all of the companies every year against each other as well as the ability to compare the products and also the insurance or banks ratings for you.

It makes no difference to us who we use because we are independent and do not have to sell a specific insurance product, so we are able to simply choose the top-rated companies and products that meet our clients’ needs!

Myth 2. Insurance costs a lot of money

Insurance in New Zealand is actually very affordable for the average Kiwi. In some instances, such as with trauma cover, we have insurance companies that are innovative in developing top-of-the-line cover not yet seen anywhere else in the world.

We have very good value compared to what you get in other countries. Once New Zealanders get their heads around this, the better they will understand what it is their personal insurance plan will actually do for them and their families in case of an emergency and the better they will feel about the cost.

There is no clear answer as to how much risk insurance someone should have and what they should be paying, because many factors come in to the equation and each individual’s needs are different to the next.

We can give standard quotes based on someone’s age, health history, occupation and gender, but two people of the same age, gender and occupation may have different health issues, which can cause different costs to each of their premiums.

Things like income, debt levels, budget and dependants’ needs all differ from case to case and each individual circumstance. My businesses follow a proven process for our clients.

To determine the most appropriate cover, there are many factors to consider like how much you should be paying, how much you can afford and what cover you should have. In terms of what cover you should have, we try our very best to get all our clients full protection first and then work our way down depending on their affordability. If it is unaffordable, we work out the best solution to ensure coverage to an extent that fits your lifestyle.

Many New Zealanders can’t get full protection because they have poor health. This is a growing problem across the western world, not just New Zealand. We see medical conditions such as diabetes, stress, heart problems and cancer, which are just a few of the health problems that have now encroached on our society.

So with that being said, people must understand that personal insurance is not something everyone will be accepted for – it is actually a privilege if you can get it. I have had many clients where I assist them in their application to only find out after the assessment that they get declined due to pre-existing medical conditions.

There are also different products that cover very different specific outcomes, depending on your circumstances and future situation. In terms of figuring out a budget, I advise our clients they should be paying anywhere from 2–4% of their total family income for their protection plan. When you look at it like this and do the calculations, it’s not a big amount to ensure you and your family are sufficiently covered financially.

In many cases, most people spend more on McDonalds and morning coffees per week than protecting themselves and their families. You can afford it, but you need to understand and see the true value of having such important cover.

Risk insurance will guarantee you and your loved ones can continue to live and accumulate wealth for the rest of your life and hopefully have an enjoyable retirement should anything happen to you or your family.

Myth 3: I will just take out what I think is right and do it myself to save money

You can do this, but like anything, if you’re not an expert and try to do it yourself, you are playing with fire. If you need medical advice or legal advice, would you take the risk and self diagnose and medicate? Would you buy the medicine at the supermarket or online somewhere? I’m guessing the answer is no, so your risk insurance is no different. Insurance like any financial services product is a serious matter and needs to be taken seriously. Seek a professional adviser, and it won’t cost you anymore.

You can get it very, very wrong, and if you try and take shortcuts such as taking out personal insurance through the likes of a supermarket or direct yourself, you will come unstuck. We have had many clients come to us in this predicament.

I guarantee you will go to claim to then find out that it wasn’t what you thought it was or you haven’t disclosed correctly. Therefore you are not financially covered for something that could have been covered by seeking professional advice who purely deal with insurance products – it’s not just a side part of their business. (Do you want fries with that?)

Most New Zealanders have their entire wealth tied up in only two areas – their family home and their ability to earn an income. If you work out how much income you will earn in your lifetime, it’s a lot of money, so why would you risk these two things by trying to take shortcuts in protecting them.

The average NZer will earn roughly $1.6 million in their life time. If we take an average salary of $40,000, and work for 40 years, that’s $1.6 million. Why would you insure your old car but not your income and not $1.6 million. Without your income you have nothing.

If you try and do it yourself you will end up with the wrong products, the wrong company, non disclosure and probably paying too much for something that you may never be able to claim. Also, a good adviser won’t cost you any extra. Believe it or not they are there to look after your wellbeing and find the you the very best insurance product and company to suit you and your needs – so why risk it?

Myth 4: The bank looks after my insurance and KiwiSaver – I can go to them for advice

You may have received very poor advice from a person selling bank products. Insurance is a side part of their business – they specialise in lending and looking after people’s bank accounts. A bank’s product is generally nowhere near as good in comparison to a top insurance company.

If you look at the terms and conditions, you will find the bank’s product covers fewer conditions and doesn’t have those additional perks compared to a traditional insurance company’s product.

How do I know this? I’ve worked at many banks in Australia and New Zealand. We were given strict targets to meet each week, and once we flogged something, we never really looked after that client again because we had such big targets to hit again the following week.

Insurance companies are constantly revamping their product portfolios. I’ve been to many launches of new product in the last 18 months, which shows they are the experts – always changing for the better to keep up with their clients’ needs.

Our company also gets many bank clients who come to us with completely the wrong products and watered-down products that they have been paying for years. Banks are great at lending money and setting up accounts but poor on giving you the right insurance or KiwiSaver advice or looking after you forever after that.

How many times have you been called by a bank adviser enquiring whether your insurance and investments are working as they should be? Never?

How many times have you been called by the bank to make sure your situation hasn’t changed or to advise you of the latest updated product that’s just come out, which is far better for you and, hey, works out to be more affordable as well.

The only time I have ever been called by the bank is to ask if I would like to increase my credit card limit. Just what everybody needs – more bad debt.

They most probably won’t call you to review your insurance policies. They have millions of clients, and every employee has huge new daily targets that they must meet, so they cannot physically give you the time and personal attention as an existing customer when it comes to you and your insurance needs.

Myth 5: Insurance brokers don’t care about me – they are only after the commission

Most good insurance brokers do really care about you. They want to build a strong long-term relationship with you, and they want you as a long-term client. Many have industry-specific qualifications.

Most advisers have small businesses with fewer clients so they can give you your own personalised service, unlike banks, supermarkets and retailers. Even being a direct customer of an insurance company can be hard as you are just another number in the thousands that they have – along with the targets for new business that each employee must achieve.

Myth 6: Nothing will happen to me

Unfortunately, this is not correct. By the time they reach retirement, a third of New Zealanders would have experienced some sort of serious accident or illness. In New Zealand, trauma cover has now overtaken income protection as the second most preferred insurance protection cover.

Trauma cover in New Zealand today has a collective annual premium of over $323 million. Claims for the last 3 months of the year were $37.6 million, with an annualised figure of over $150 million in claims.

Trauma claim data in 2014 shows half were for cancer, another 13% were for heart attacks and 4% were for strokes. For women, 65% of claims were for cancer, with breast cancer leading the claims. For men, cancer made up 37%, with prostate and melanoma leading the claims.

Today, we are living faster more stressful lives, we work longer hours and everything is more expensive. Stress is a real killer due to our lifestyles, and diseases are far more prominent.

It’s not a matter of if something happens but when. Ask yourself if you know anybody who has had cancer, diabetes, a heart attack, a stroke, been sick or injured and cannot work or had an unforeseen accident. The odds are that it will happen at some stage to you.

I have spent half my life listening to people and their fears and concerns regarding insurance. I know people who have huge debt but don’t believe in insuring themselves or protecting what they have built over the years.

If something were to happen to them, they would lose everything. It’s crazy to think they would risk everything they have built over their lifetime for the cost of a few thousand dollars each year. The funny thing is they insure their home, contents and an old $3,000 car but won’t insure themselves or their ability to earn an income.

The average New Zealander will earn over $1.6 million in their lifetime – why would you bother insuring a car or home contents or a boat worth nowhere near this? It’s just a matter of not understanding. Insurance is something that we traditionally haven’t been brought up with, don’t understand or in many circumstances don’t see value in.

Once you find an expert to help explain what you really need to ensure you have full financial protection, they will help you through the entire process to apply for it and will be there looking after you for the duration. You will then see value in it.

Myth 7: The government and ACC will look after me

The government and ACC will not look after you!

New Zealand used to be a socialist society where we paid taxes and the government looked after us for everything – health, sickness, retirement, schooling and university. A Nanny State. Today, we are living in an ageing population with limited resources.

We are now in a society where we have to look after ourselves. In my day, all schools were roughly the same throughout New Zealand. Today, if you want your kids to go to a good school, you must pay or inevitably pay to live in an area where there’s a good school.

In the health sector, spending is up by 40% on the past 5 years and growing – this is not going to stop either. In the public health system, you will find many people are waiting for treatment. For example, one man was diagnosed with terminal lung cancer 5 months ago and he is still waiting to find out when he can begin chemotherapy treatment.

Such delays are putting cancer patients’ lives at greater risk. Health insurance is now becoming a priority for the average household. We insure our furniture and cars, but now it’s time to take out health Insurance to protect ourselves.

One insurance company has recently launched a new product to help those people who cannot afford health insurance but need that extra cash when someone in their family does require hospitalisation or time off work due to a medical injury or the like. Many clients are also taking it out as an alternative cover alongside their health insurance.

Many New Zealanders are suffering at the hands of a public health system that is bursting at the seams. It’s now failing to supply a minimum expectation and assured access for those needing urgent treatment, and they are now facing longer waiting times.

Hospitals say cancer patients can now anticipate a wait of about a month for treatment, depending on how curable their cancer is. Under the hospital priority system, those with terminal cancer – where treatment aims to improve and prolong life – can expect to wait up to 6 weeks.

There can be nothing more depressing when facing such a life-altering shock then to be told you must now wait in a queue to get treatment. A few years ago, breast cancer patients faced waits of 5–6 months for radiation therapy because of a shortage of therapists.

In many cases, the government has sent patients to private hospitals in Australia. This is occurring because an increasing number of people are being diagnosed with cancer combined with an ageing population.

Private health insurance is the only remedy that can help solve this problem and will become the way forward, just like in most western countries today.

Some patients without health insurance who are afraid and frustrated by the waiting times once diagnosed with an illness are spending large sums of money for private chemotherapy. Those who are lucky enough to have some cover are able to use their lump-sum trauma payout to use towards this private treatment.

Some can dip into their savings to cover any privatised treatment, but for most, they have no choice but to go on the waiting list and to take the risk and endure the wait along with their families and friends by their side.

Many New Zealanders express their anger: “We pay our taxes, and we have never been on the dole or benefit. The one time we need some help we have to wait.”

The following comment was made in response to an article in the Otago Daily Times (ACC claims issues raised with UN):

ACC when you’re over 45

Submitted by lgn on Tue, 25/03/2014 – 12:18pm.

Try and make a claim for something when you are over 45 [–] see how you get on. In most cases they will refuse to pay for any treatment and tell you it [is] an age-related issue not an accident, even if it was caused by your employment.

Back problems and knees almost always get refused for treatment after the age of 45, even if they have paid for treatment for the same problem earlier. It’s happened to me and others, I know. ACC was informed that I would need 3 operations on my back to repair damage done to my back through work-related injuries. They covered the first two but once I was over 45 they refused the last one, saying they now believed it to be an age-related issue after having talked to their ACC doctors.

It’s not such a wonderful system when you are on the receiving end of it. I looked at taking them to court but could not afford the cost. So I had to retrain in order to find a new job.

It’s all to do with cost cutting so they can hire their jets and go [to] the training weekend in Wanaka.

Myth 8: It’s a waste of money – I will never be able to claim and get my money’s worth

I don’t hear this very often, but I have come across the odd person with this attitude – I have a good friend who thinks like this. I say to them, “You know what? I hope you never have to make a claim ever, but the fact of the matter is many people do make claims because they become sick or injured or, worst case, they die.

You wouldn’t wish this on your worst enemy as it doesn’t just affect you as an individual, it affects your whole world. What if you can’t pay your bills because you can’t work? I do hope you NEVER have to make a claim and all those premiums you have paid out are wasted, but in the real world, you may have to, and you will thank your lucky stars your family and you had that cover.”

The reason I say this is because personal risk insurance is not a way to get rich or make money or even to get your money back. It’s an emergency safety net in case the worst should happen. Do you know someone who has been hit with an illness or accident? We all do!

My mother was struck down with ovarian cancer 1 year ago, which spread to her stomach and lymph glands. She fought the hardest battle of her life, but eventually it got her.

She spent thousands of dollars doing alternative treatment to stop herself from dying. She withered away in hospital then hospice for about 3 months surrounded by her family and friends and young grandchildren. We would visit her daily and spend nights with her in the hospice as we all waited and watched her die.

She eventually died at age 63 – taken way too soon. It was the worst experience of our lives, and the disease was the worst thing I have ever seen anybody have to go through. It was pure torture for us to sit back and watch as helpless as we were.

You’ve now read the above stats on how many New Zealanders will get struck down with something, so it’s not a matter of who but when!

If you want any personal help or advice regarding life insurance,  trauma cover, income and mortgage protection insurance, health insurance, living expense cover or any of the the above, you can go to our website www.lifeplans.co.nz or call 027 446 4143. We are happy to help you.

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