Archive for Buying on-line

Stay-at-home parents need protection.

Posted by Steven

It’s distressing to learn how few families with young kids have life insurance. Stay-at-home parents have a special need for life insurance. Should a stay-at-home parent pass away, the remaining parent would find themselves suddenly paying for childcare and everything else a stay-at-home parent does on a day to day basis.

The minimum cost of replacing a stay-at-home parent, with one pre-schooler and one school going child, we estimate would run to at least $40,000 a year. Breaking down the price of having someone else handle our stay-at-home parent’s various duties:

  • Cooking, laundry and cleaning, $15,000
  • Child care, $8,000
  • Homework and after school help, $5,000
  • Kid’s taxi alternative, $2,500
  • Shopping, garden work, party and activity planning, finances, etc., $9,500

That’s why it’s essential the stay-at-home parent has a life policy. What you need is a policy that’s easy to buy, easy to own and cheap! Buying what’s called “protection insurance” is simple and costs practically no money at all. From Pinnacle Life a 36-year old female can get a $500,000 life insurance policy and only pay $25.69 per month. Men’s coverage is a little more expensive due to differences in factors like life expectancy.

Remember these simple pointers when shopping around for a life insurance policy

  • Researching and shopping for life insurance is easy on the internet.
  • How much life insurance do you need? The simplest rule is … whatever you can afford to maintain long-term.
  • Cash back offers and the like are good for the first year, but life insurance is a long term commitment, so get the policy that is going to be the best value over a long-run.
  • Protection insurance which is widely sold in NZ, is what is known as annually renewable term. Each year the policy premiums will increase with your advancing age. Simply put, the older you get, the more you pay.
  • Certain high risk health conditions make life insurance more expensive. If you have such a condition, be prepared to allow the insurer to have access to health records, so they can determine your price.

For a quick quote to see how much you’re likely to pay for life insuranceclick here

Not easy as I thought..

Not easy as I thought..

| | Comments (1)

An idiot’s guide to disability insurance

Posted by Steven

What would happen if you had an accident, or a debilitating illness took away your ability to work. “How would you survive — how would you pay your bills? It is a wake-up call that inspired the concept of disability insurance.

What is disability insurance?

“Disability insurance protects your earning power.” It helps cover your loss of income by providing you with a monthly benefit if you’re unable to work for a certain period of time due to an accident or illness. In reviewing disability insurance you need to be careful to ask;

  • how a disability is defined,
  • what conditions are covered and
  • how much and how long you can expect to receive income

How is disability defined?

Disability insurance pays a monthly benefit to help cover loss of income for those under age 65 (generally) who can’t work because of an injury or illness. The definition of “can’t work” is a key factor in determining the type disability insurance and cover. A distinction is drawn between, can’t work in any occupation? or can’t work in the occupation you’re currently employed.

The terms of reference in any disability cover product will highlight the insurer’s obligation to pay. Products that define a disability that results in an inability to work in “any occupation” are generally cheaper, as the insured needs to be severely disabled to the extent that they cannot perform work tasks in any occupation. For example, a builder who suffers a back problem, may be prevented from working in the building industry as a labourer, but a back injury will not be an impediment to a regular office job.

On the other-hand, disability insurance that covers “own occupation” enables the claimant to make a claim so long as the disability prevents the insured from employment in their current occupation. For instance, a musician with “own occupation” disability cover will be entitled to claim if one of their fingers was broken accidently, and the musician was unable to earn a living for a period of time. Naturally, such disability insurance is a lot dearer, and usually only covers a % of income earned and for a limited period of time.

What conditions are covered?

  • Total and permanent disability (TPD): is one that “will remain with a person throughout” his or her lifetime, or he or she will not recover, or “that in all possibility, will continue indefinitely.  If your job is knowledge and communication based, it is very difficult to be totally disabled. If you can think and talk – you can work – at least somewhat.
  • Non-total disability (NTD):  covers the insured in the event that the injury sustained does not have to be permanent or total, and the beneficiary is entitled to make a claim so long as the disability resulted in a loss of income for a defined period of time.

How much and for how long?

All disability covers have a claims limit. TPD payments tend to be lump-sum one-off payments. Disability income products (NTD’s) tend to pay a proportion of income earned for a period of time. Often these products will also have a stand-down period before any claim can be lodged. For example you must be off work for a period of more than 30 days, and the payments will cease after a period of time.

Other interesting facts!

Of all the products sold by insurers, disability insurance is the one most likely to end in dispute between the parties. The propensity for fraudulent claims are high. Overstating income, or overstating disability effects result in prolonged and excessive payments for the insurer. The evolution of this product has seen higher and higher rates to cover insurer’s claim experience.

| | Comments (2)

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.

| | Comments (1)

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.

| | Comments off

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.

| | Comments off

Can marriage insurance protect a marriage?

Posted by Steven

On a recent visit to Beijing, China’s Sunshine Insurance Group showed me just how innovative they are in developing new products. Chinese life insurance industry may not yet be online, but in terms of product offerings, they claim to be the most innovative yet when it comes to insuring risk. To prove his point he described their recently introduced a new marriage insurance called “love you forever ” aimed at protecting the rights of wives in divorce.

According to the company, the insurer must be the husband and the wife will receive 60, 80 or 100% of the interest in the policy on divorce or on reaching its expiry term, whichever should come first. Fifty years after being insured, the wife will receive a payoff from the company to celebrate the golden wedding.

Using NZ currency equivalents, if the husband buys a $100,000 policy, on the 50th anniversary, his wife will get $800,000 from the account if she had a 100% interest in the policy. In the event of a divorce, the pay-out is substantially reduced. The incentive to maximise the pay-out is to stay married for the full term of the policy.

Sunshine Insurance Group said that women are still a vulnerable group in society as well as in marriage, so this was a way of protecting women’s rights. Some believe the idea is meant to reduce the chance of a husband having an extramarital affair.

However, other Insurance companies have expressed concerns about marriage insurance, pointing out that some couples might choose to divorce in order to qualify for a pay-out, and then re-marry, as there was nothing in the insurance contract preventing such abuse. Others criticise the stipulation that the wife benefits because sometimes wives are equally responsible for divorces.

Marriage insurance… innovation or just another attempt by Insurance Companies to incentivise its policy holders to retain their investment linked insurance policies?

| | Comments (1)

New Bird Flu, are you at Risk?

Posted by Steven

A new strain of bird flu has broken out in China H7N9. Is the new bird flu strain likely to reach New Zealand or is this just another health scare? The Chinese H7N9 outbreak started just a few weeks ago, and so far authorities have reported upwards of 82 individuals infected with this strain of flu, with most of the cases originating in the Shanghai area. The most recent outbreak is the first time that the particular H7N9 strain has been seen in humans, joining a number of other flu variants that have crossed the species boundary, as you can see in this infographic.

Information is Beautiful on influenza

Diagram showing bird flu mutation

So far, no concrete evidence of human-to-human transmission of H7N9 has been found. That said, there are a few other options – as seen in the infographic, this particular flu can infect pigs, and may have also mutated to infect other animals with which humans might have contact. Alternatively, the virus may be able to survive outside the bodies of birds, which could result in contraction of the strain even without physically touching or being close to a bird.

If H7N9 turns out to be transmissible by human-to-human contact, there is the risk, as with any new flu strain, that it could turn into a pandemic. As of yet, H7N9 infections have stayed within China, – however, this could change at any time, so vigilance and flu-prevention techniques are always good practice.

 

For those traveling to China, avoiding poultry markets or any other areas where you might come into contact with birds is extremely wise, as are frequent hand washing and covering the face when coughing or sneezing.

Source: http://dailyhealthpost.com/new-bird-flu-scare-hits-china-are-you-at-risk/#axzz2RFWqUgGY

| | Comments off

What’s the difference between buying Funeral Insurance or a Pre-paid Funeral Plan?

Posted by Steven

Funeral insurance or “final expenses” insurance is a life insurance policy with a small cover amount, such as $5,000 to $25,000, that you may buy directly from and Insurer like Pinnacle Life. You can name any beneficiary, typically a family member, who would make the claim and receive the money upon your death. That beneficiary would then be responsible for using the money to carry out your wishes.

The beneficiary legally could decide to use the money any way they want, so make sure you trust your beneficiary. Also, if your cover amount exceeds the cost of your funeral, the beneficiary keeps the difference.

Another type of life funeral insurance is called pre-paid insurance. It is intended for the person who has selected specific arrangements at a funeral home and wants the assurance that those arrangements will be paid for and implemented.

Unlike funeral insurance policies, which you buy directly from an insurance company, pre-paid policies are sold by funeral home directors. The funeral home is the beneficiary of the policy and the funeral director receives a commission, for selling you the policy. The Funeral Directors Association of NZ website has some good information about pre-paid funeral plans. http://www.fdanz.org.nz/pre-paid-funerals.aspx

Unfortunately, unlike funeral insurance, there are no websites which allows one to comparison shop for pre-paid funerals, so you’ll have to phone around to compare prices and policy terms.

| | Comments off

Who actually reads the ‘small print’ on websites…?

Posted by Steven

 

Websites are now plentiful offering ‘calculators’ that enable you to work out the amount of life insurance cover you need.

But look more closely on some websites and you may find a ‘disclaimer’ saying your calculation and the information they’re providing may not be reliable… Why provide and promote tools that can’t be relied upon to meet your needs?

Typical disclaimers (from a NZ website)…“At Your Own Risk Any transaction you enter into with an Insurance Provider etc, etc… is conducted and completed entirely at your own risk. Neither [website name] nor the Insurance Providers give any advice or make recommendations as to the suitability of cover. [Website name] does not make any representations nor give any warranties in relation to any products or services promoted or sold by the Insurance Providers including: a. Content, description, worthiness, suitability for any particular purpose, quality or legality of the products and services that are promoted and offered by the Insurance Providers on the Website; b. Whether any insurance or service offered by the Insurance Providers on the Website will meet your requirements or expectations.

Can you imagine buying a new HP calculator with a disclaimer that said “hey, this is a great calculator but don’t rely on the answers you calculate”. Or what about an aircraft instruction manual saying “we’re not responsible if you follow our instructions’… or a disclaimer on a restaurant menu saying …”we’re not responsible if you get served something entirely different from what you ordered…” Nice to see a website that’s willing to stand 100% behind the information, tools and services it provides! :)

| | Comments off

Premiums to match your DNA?

Posted by Steven

An insurance joker once professed, “Insurance employees don’t need titles on their business cards; white shirts actuarial, blue shirts marketing, black shirts underwriting”. Underwriters are viewed as the morgue of an insurance company, “the policy prevention department” as my business partner once put it. Assessing individual mortality is part science and part luck. But the advances made in genome sequence are going tip the scales greatly towards the world of science.

The X Prize Foundation is offering US$10M to the first team to sequence the genomes of 100 centenarians.  In layman’s terms “find the genetic code for those that live beyond 100 years”.  The competition starts Jan 2013, and the sequencing has to take place in 30 days.  The competition aim is two-fold. First, find a way in which genomes can be sequenced accurately in a relative short period of time, second, determine what genetic pool is consistent with longevity. No easy task apparently (read the article in the economist for more info).

Back to the black shirt underwriters. The ability to sequence genomes quickly will make the cost of getting a report on an individual’s DNA make-up much more affordable. A hair sample will give an underwriter an accurate description of the likelihood of all or any serious alignments that may linger, and a much better view of longevity. No more blood or urine tests; simply send a hair sample and with-in minutes the underwriter will have a health assessment waiting on their PC with the aid of some ingenious piece of software. The push to economise genome sequencing is going to revolutionise the underwriting world, and my pick is it is going to happen a lot quicker than underwriters are prepared for.  Resistance to change will fall by the wayside when their masters learn of the cost savings to be made, and the improved outcomes these new techniques will deliver, particularly when underwriting for critical Illness and disability products.

The tag-line of the future?……  Life insurance premiums as unique as your DNA

| | Comments off

« Previous entries Next Page » Next Page »