How much life insurance do I really need?

Posted by Steven

How much life insurance do you really need? It takes a few steps to calculate, but it’s not rocket science. The only thing that really matters when it comes to determining how much life insurance you need, is how much income do your dependents need if you aren’t around? To answer this you have to first answer these two questions;

  1. how much do you spend each month? (Use your bank statements to calculate your monthly average spending) and
  2. do you have any realisable investments or assets other than that marked for retirement or future know expenses like kids education?

A working example to calculate your insurance needs…. Let’s say you know you spend $6,000 each month to pay all your bills including your debt repayments. Of the $6,000, you earn $3,500 and your partner earns $2,500. Your monthly income is equivalent to $42,000 a year ($3,500 x 12). You need enough protection insurance so that if you pass away, you could invest the proceeds and earn $42,000 after tax. How do you calculate that? If you assume you could earn 5% on the money, simply divide $42,000 by 5% and you have your answer. In this example, the number is $840,000 (42,000 / 0.05). That’s how much savings you need to invest at 5% to earn $42,000. The $840,000 is what your survivors need to get through until they don’t need your income. You can offset it with other insurance you already carry or if you have savings or realizable assets that isn’t earmarked for retirement or other purposes. This isn’t a scientific approach – it’s a ballpark calculation. But it’s pretty close to what you need, and it’s a calculation you can do yourself. It’s also a heck of a lot better than a wild guess.

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Will Google enter into the NZ Insurance marketplace?

Posted by Steven

Really interesting article in Tech Crunch  and subsequent comments about the expansionist plans (or not) of Google Inc. into the insurance domain. http://techcrunch.com/2014/06/21/will-google-enter-the-insurance-industry 

Would Google ever likely enter into the New Zealand insurance marketplace? Probably not the sort of financial risk profile Google Inc is ever going to consider. However, owning insurance distribution channels, and hence having access to data generated by an application for insurance is another matter. The application for all insurance products by its very nature of risk profiling provides Google with a great opportunity for value add services. Imagine, if Google knew what vehicle you’re looking to insurance, think of the range of products and advertising material that can be served to you, all neatly targeted working on the profile of your selected automobile and other related search behavioural factors. Better still, if Google have access to your sloppy driving record, think of all the moral adverts popping up on your screen. Extend this to life, next thing Google’s into purchasing pharmaceutical companies. The mind boggles, but the old adage data is king seems to be very much back in vogue. Search will remain a free service thanks to Google Inc. Dishing up targeted Google display ads the commercial world will pay for.

 

 

 

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Love your business partner, but can you work with their spouse?

Posted by Steven

If you’re in a partnership business (regardless of the legal structure) you definitely need some life insurance. In all likelihood each shareholder brings a unique skill set to your business; it’s probably the fibre that brought you all together in the first instance. Together your skills complement each other and provide all the necessary tools to run a successful business. In the ordinary course of events, if one partner should die the likelihood is you’re about to inherit by default a new business partner. One which is very unlikely to have the same skill set as your last, a business partner whom now owns shares in your business, where  in all probability they would have preferred the cash.

A simple buy-sell agreement in the event of a business partner’s death or disability will allow one partner to buy out the other partner(s) in the case of death or terminal illness. Each partner simply buys a policy on each of the other partners. In the event a partner dies, the other partners have the money to purchase that portion of the business and pay the deceased family or beneficiaries.

Sounds simple and obvious enough, so why are business owners so under-insured in this space given the low cost of protection insurance?

  • In many circumstances there can be a large age difference between partners. This is often the case in technology related industries; technological expertise comes from the younger partner, and the finance from the older partner.  Here the challenge is to get the same cover in place where lives insured may be very different by way of health and age and hence the cost of the policies will be very different.
  • When you start out, it’s difficult to put a future value on the share capital of the business in 5 or 10 years-time.
  • Some-times money does not solve the problem. Acquiring the business partner’s shares, does not solve the problem of acquiring their skill set or intellectual property.

Like all life insurance products, if you can’t afford what you’re likely to need, having some protection is better than none at all!

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Fear no animal or beast..it’s humans and mosquitoes…

Posted by Steven

Bill Gates recently used an infographic to publicize a fight against diseases carried by mosquitoes.

Sharks are responsible for only ten human deaths a year. Around 100 people are killed every 12 months by lion, while crocodiles are responsible for about 1000 deaths in a year.  Among the most dangerous animals listed in the graphic are dogs, at number four, due to 25,000 human deaths a year, mostly from rabies caught during dog attacks. The third-deadliest species for humans are snakes, which are responsible for 50,000 deaths every year.

Nearly ten times as many people meet their deaths at the hands of other people, totalling 475,000 annual fatalities. Mosquitoes are the world’s number one killer.

The worst is malaria, which kills more than 600,000 people every year; In addition to malaria, several species of the animal can carry several other potentially deadly diseases, including encephalitis, dengue fever and yellow fever.

Mosquitoes are native to every area of the world, except Antarctica. There are more than 2,500 species of the flying insect known to mankind.

Source: http://www.gatesnotes.com/Health/Most-Lethal-Animal-Mosquito-Week

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5 Breast cancer myths, debunked

Posted by Steven

Among diseases rife with myths and half-truths, breast cancer is one of the most misunderstood. The truth is that scientists still don’t know what causes breast cancer—only that certain factors, such as obesity or drinking too much alcohol, may increase risk. Read on to find out how to separate fact from fiction so you can stay safe.

Myth 1: Breast cancer is largely genetic.

Fact: Just 5 to 10% of cases are due to faulty breast cancer genes BRCA1 and BRCA2. Even in women who have a family history, many cases are due not to specific gene mutations but rather due to a combination of shared lifestyle factors and genetic susceptibilities according to the American Cancer Society.

Myth 2: Small-chested women have a lower risk.

Fact: All breast cancers develop in the cells that line the ducts or lobules—the parts that make milk and carry it to the nipple—and all women have the same number of these, regardless of breast size. What makes breasts bigger or smaller is generally the amount of fat and stroma (fibrous tissue), which research shows have little impact on cancer odds.

Myth 3: Breast cancer always appears as a lump.

Fact: Approximately 10% of those diagnosed with breast cancer have no lumps, pain, or other indications of a problem in their breasts. And among lumps that are detected, 80 to 85% are benign. They’re often cysts or noncancerous tumours called fibro adenomas.

Myth 4: Birth control pills cause breast cancer.

Fact: Doctors say the evidence isn’t strong enough for them to recommend that women stop taking birth control pills to avoid breast cancer. Most studies found no association between pills and cancer whatsoever.

Myth 5: Young women don’t get breast cancer.

Fact: While it’s true the disease is more common in postmenopausal women, breast cancer can affect people of any age. In fact, women under 50 account for 25% of all breast cancer cases, and they tend to have higher mortality rates. This may be partly explained by the fact that younger women tend to have denser breasts, which makes it harder to spot lumps during mammograms.

That said, any lump or breast symptom from the list below should be checked by a doctor.

  • A change in how the breast or nipple feels or looks
  •  A lump or thickening in or near the breast or in the underarm area
  • Breast pain or nipple tenderness
  • A change in the size or shape of the breast
  • A nipple or skin that turns inward into the breast
  • Feeling warm to the touch
  • Scaly, red, or swollen skin of the breast, areola, or nipple, perhaps with ridges or pitting that resembles an orange peel
  • Nipple discharge

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Pinnacle Life launches simple accidental death ‘add-on’

Posted by Ed

PINNACLE LIFE today added a new ‘tick-box’ feature to its life insurance product; add 50% more accidental death cover for just 20% more premium.

In 2007, Pinnacle Life became the first life insurance company in New Zealand to offer fully underwritten life insurance products online, direct to consumers. The purpose of this online offering was to make life insurance more accessible to New Zealanders with relatively straightforward life insurance needs.  In 2010, Pinnacle’s online product was further enhanced with an option to add 25% extra cover for serious illness, by simply ticking a box during the online process.

In line with keeping products simple, Pinnacle has now added a second ‘tick-box’ enabling the applicant to add 50% more cover for accidental death for just 20% more in premiums.

Why buy extra cover for accidental death?

A typical reason why people seek extra cover for accidental death is because the financial impact of dying ‘suddenly’ can be more disruptive to their family, than if they had more time to put their affairs in order. Adding this cover affords the insured person’s family a ‘softer landing’ if they were to die suddenly in an accident.

The Pinnacle Life website has been designed with the ‘consumer’ in mind, meaning; you don’t need to be an insurance expert to buy a life insurance policy!  The website provides information together with policy documents written in ‘plain English’. Better still, the buying process is simple. The website can authorise a policy in as little as 10 minutes and policy documents are emailed to the applicant straight away.

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PINK RIBBON = Breast Cancer Awareness

Posted by Ed

October is Breast Cancer Action Month. This is all about making people aware that breast cancer is the #1 woman-killer in New Zealand and that women should undergo regular screening.

Some facts:

  • All women have a chance of developing breast cancer in their lifetimes.
  • Around 2,400 women are diagnosed with breast cancer each year; that’s almost 7 per day!
  • As women grow older, the risk of being diagnosed with breast cancer increases…
Age Risk of being diagnosed with breast cancer
30s 1 in 204
40s 1 in 67
50s 1 in 35
60s 1 in 33
70s 1 in 38
  • The rate of breast cancer diagnosis is increasing in NZ… an 18% increase in the ten-year period 1995 and 2004…
  • However, the death rate from breast cancer is falling slightly… due (in part) to the efforts of making women more aware of the need for regular screening… which is exactly why we’re talking about it on our blog!
  • Still, around 650 women are likely to die this year from breast cancer… that’s 12 women per week! So no reason to be complacent.

In NZ many women tend not to have regular screening mammograms…. this means if there is breast cancer, it’s often well established by the time their doctor examines them and these women are more at risk of dying from breast cancer… obviously.

Finally, back in 2011 Pinnacle Life launched an insurance product called Cancer Cover.

The product pays out a lump sum up to $250,000 if you’re diagnosed with cancer… cash you can use to supplement your income, pay medical bills or simply take some time out.

To get a quote for Cancer Cover, click here

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Hello TradeMe – welcome to the world of life insurance

Posted by Steven

With much fanfare TradeMe have launched into the world of Life and Health Insurance distribution. Naturally, there has been chatter in the industry; Why TradeMe?  What will this do to the industry?

The aggregation business model is strong in other countries, iSelect in Australia, SuperMoneyMarket in the UK and Geico in the US all lead the way in this space. There is no NZ equivalent with the range of products and services these companies offer, but one would have to think Life Direct would be the best contender given its standing in the life and health space. From the side-line, one would think the Life Direct model had ample opportunity to flourish as an independent distributor. So, what has TradeMe got to gain by purchasing Life Direct?

Phil Macalister in GoodReturns questioned TradeMe boss Jon Macdonald, including asking why not implement a Pinnacle Life online model, in which the consumer can actually ‘buy’ on-line.  Would Pinnacle Life not have been a better fit for TradeMe consumers?

Unfortunately, Macdonald did not reveal much, other than to suggest the obvious strategy of growing market share by levering their vast website traffic to promote the offering, but making no comment on anticipated sales increase. Pinnacle Life in his view was not the right fit, TradeMe is not looking to purchase a manufacturer of life insurance products.

Pinnacle Life view TradeMe’s acquisition of Life Direct as positive for the industry. Yes, Life Direct will be a competitor, but they always have been. We can’t see what will change, other than Life Direct not needing to advertise as much – because they get a free ride on the back of TradeMe traffic and accessing TradeMe’s database. However, it may require renegotiating the commission they receive from the insurance companies that they represent, to feed the TradeMe distribution machine.

The good news for the industry is that TradeMe has elevated the category of ‘Life Insurance’ in the market for the entire industry and we believe Pinnacle Life will be a beneficiary. If it’s ok to source life insurance through TradeMe, then buying life insurance online direct from Pinnacle Life or a Cigna becomes an easier and maybe preferable option. Introducing a Life Insurance as a category on the TradeMe website tells consumer that ‘maybe you don’t need a broker after all to buy life insurance’.

The risk insurance market in NZ is worth about $1billion each year. Direct companies currently occupy only about 6% to 8% of the market. The banks enjoy approximately 28% of this market and the balance is served by independent financial advisers.

It’s difficult to fathom that TradeMe is targeting the ‘direct’ market segment given its relatively small size. And since the banks have a clear segment of their own, this leaves the segment traditionally served by financial advisers.

So, the question is probably not about how TradeMe will impact Pinnacle Life or other direct-to-market insurers; it is more about how TradeMe will impact the independent financial advisers.

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One joint life policy is not always better than two individual policies

Posted by Steven

You may automatically assume that buying a joint life insurance may be cheaper and better than buying two single life policies, BUT this is not necessarily the case.

For starters, generally taking out two separate life policies may be marginally more expensive, but you will get twice the pay-out if you both die during the insured term. With a joint single life policy there would only be a single pay-out.

Also, if you take out a joint life first death policy (often used for covering mortgages), the policy would pay-out then cease in the event of either of you dying during the term. This will leave the surviving partner having to take out a new life policy, which is often a lot harder and more expensive give the increased age of the surviving partner.

Finally, having each life separately underwritten and insured on its own merits, makes each party independent of the other. Hence the policy is not dependent on the survival of the marriage or partnership. With individual policies, all the potential arguments (like changing ownership or cancelling a joint policy) disappear.

So don’t just assume a first death joint policy is best for you.

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Safest way to travel in NZ …… public transport!

Posted by Steven

Safest way to travel in NZ …… public transport!

In promoting our complimentary accidental death cover offering, we came up with some interesting statistics about causes of death by travel accident. Who would have thought the safest way to travel in NZ is public transport!

The graphs below show a snapshot of the latest comprehensive statistics we could find.

 

 

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