Insurance is something most of us think we are fairly familiar with. But some common misconceptions might be standing in the way of you getting the maximum protection possible from your insurance policies.
How many of these have you heard?
#1: I don’t need insurance, ACC will help
New Zealand’s ACC scheme is great if you are injured and need to take some time off work, have to make adjustments to your home to cater for your injury, or need treatment to get back on your feet. But unlike many Kiwis believe, ACC will not help at all if you are off work with an illness.
In this situation, you would usually have to rely on the sickness benefit. But if you have a partner with a job, it is unlikely that you would qualify.
Income protection cover, in comparison, provides you a clearly defined amount that will be paid out for the period specified in the policy. Income protection insurance can provide up to 75 per cent of your gross pre-disability income if you’re unable to work due to serious illness or injury, and will pay for a set period that you choose (which could be two years, up until retirement age, or when you’re able to return to work). This is worth considering if you might find it hard to meet all your normal expenses, or pay your debts, if you did not have your income.
#2: I don’t need insurance, we have free healthcare
Again, New Zealand’s public healthcare system is a real asset to the country. But it is not always possible to get treatment when you want it, particularly for conditions that are chronic rather than acute.
In other words, the system is designed to respond to emergencies. Anything that can wait tends to end on a waiting list, at least for a while. Just ask anyone who is facing a long wait for a new hip or knee in the public system. If you have health insurance, you can usually reduce the wait significantly and book the treatment you need when you want it, and where you would like to receive it. You may also have more freedom to choose who provides the services.
#3: I will have enough savings to cover me
This is a great aim, but it may not be easy to achieve. About 40 per cent of New Zealanders have less than $1000 in savings, according to research from ASB, and the costs associated with being off work or needing elective surgery can add up quickly.
The amount you would need to save to be able to "self-insure" might be higher than you expect. You might need to be able to cover a long period off work, if you are saving rather than taking income protection cover, or the cost of surgery in the private system, if you are opting not to take health insurance.
#4: Insurance is too expensive
There are several levers that can be pulled to affect the price of an insurance policy. You can opt for longer stand-down periods if you can afford to cover them, smaller amounts insured or shorter benefit times, which can help you maximise value on a budget.
This is where having an adviser can be beneficial. We can help you determine what’s most important to you and your circumstances and give that priority. It's also important to remember that choosing an insurance policy based purely on price is not a great strategy. If you can afford it, it may well be worth paying a bit more to get the cover you need, and which may be more likely to help you if you hit trouble.
#5: Now I'm sorted, I don't have to worry about the future
If you already have cover in place, that's great! But it's important not to just "set and forget". Schedule regular check-ins with us to make sure that your policies are growing with you and are still fit for purpose. Over time, the cost of some of your policies may increase. If that's something that you would like to protect against, you could consider taking some "level" policies - these have premiums that remain the same even as you age. Level premium policies are generally more expensive than stepped premiums early on, but because the premium remains the same over time, there can be savings later in life. To maximise the benefit, you’ll usually need to take out the cover while you are young and intend to hold it for a long time. Get in touch with us if you are wondering whether this is a good solution for you.
#6: I don’t need insurance because I’m single
Contrary to popular belief, insurance is not just for people with a partner and kids. If you’re single, health insurance can be a good idea as it can give you faster access to treatment. And the younger and healthier you are, the more comprehensive cover you can secure, as all your future medical conditions will likely be covered.
As for life insurance, it may not be needed at this time. But if you’re single and have a mortgage, you might still want to take out life cover so that you can leave a debt-free property to your loved ones.
Lastly, if you're living on a single income, it's potentially even more important to make sure that income is covered, so that you can get through if an illness puts you off work for a while.
Like to talk?
We can help you bust the myths and misconceptions about insurance, whether you are looking to protect your income or ensure you can get the medical treatment you want when you need it. Get in touch today to find out how insurance can offer you extra peace of mind.