In a recent NZ Herald article lung cancer has been termed as the deadliest cancer and talks about lack of treatment options here in New Zealand. Lung cancer is attributed to killing five Kiwis a day, making it a top killer among other cancers including breast and prostate cancer.
In a comparison between NZ and Australia, it is reported that while our neighbours have access to 11 publicly funded non-small cell lung cancer treatments, we have only three. The new treatment approval process in NZ is painfully slow compared to other OECD countries. For instance on average within the OECD the cancer treatment approval process took less than 250 days but would take more than 1,500 days in NZ, stated Philip Hope - Chief Executive of the Lung Foundation.
For cancer patients another option for treatment is to go the non-PHARMAC treatment route. So what’s the difference between PHARMAC and non-PHARMAC? To put simply, PHARMAC drugs are the ones which are funded by the New Zealand government under the public healthcare system and that have been approved by Medsafe. There are a lot of drugs that are not PHARMAC funded but are Medsafe-approved - we call these non-PHARMAC drugs.
Non-PHARMAC drugs could be the most appropriate treatment for patients for a range of reasons. But they can be very, very expensive. Non-PHARMAC benefits in health insurance provide funding for non-PHARMAC medicines – creating greater choice in treatment when it’s needed. nib Ultimate Health Max provides cover for non-PHARMAC drugs up to $300,000 (and $600,000 if treatment includes surgery). There is also a $20,000 non-PHARMAC benefit under both nib's Ultimate Health and Easy Health policies.
An interesting statistic, that is often ignored, is that 100 of every 100 people alive today will die. That is called 100% mortality - No one gets out alive.
We know it is going to happen – that “statistic” is a surprise to nobody. Yet many people have a fear of discussing life insurance – or think it isn’t necessary for them at the moment. Sometimes people are quite correct – they do NOT need it. But how can you tell if you are unsure?
There are 2 key areas to think about when considering Life Insurance:
When is it necessary?
And when it is, how much do you need?
Life insurance is a waste of money for anyone who has no dependents or liabilities that their existing estate couldn’t meet. In other words, when there is no-one else financially dependent on you there is no real loss that requires life insurance to step in and fix.
There are 2 possible exceptions to this general rule though. Sometimes a lender will insist on some cover to increase their lending security, and sometimes people will start an insurance program before they actually need it just to ensure they get cover on good terms (guarantee their insurability while they are in good health).
The other side of the argument of course is you DO need life insurance when someone else is dependent on your financial contribution and will suffer a financial loss if you die. If you aren’t around anymore, but the need for your financial contribution is, then you should have life insurance. Nothing else is quite as certain to walk in the door and help a family on the day you no longer can.
How much one needs is the tougher question, and can often only be adequately answered with trained and professional advice. There are various methods used to determine the value of a human life, and each method has some merit. One DIY way of getting a feel for what you may need is to do your own basic “needs analysis”. Just pretend you aren’t here any more – and then get your partner to work out what they need coming into the house starting next week.
What last expenses are required (the settlement of estate, funeral expenses, etc)? What loans or liabilities need to be removed? Is there a need for an emergency fund to see a family through for 3-6 months? If so, how much? Does money need to be set aside for other purposes, such as children’s education, or a partner’s retirement fund? Spend the money.
Your partner then does the same – and you may come up with different amounts and that is okay. Just because less insurance is required for one person in a partnership it doesn’t diminish their value. You should be working out what you need, not what is politically correct.
Don’t be scared of large numbers either – sometimes the numbers appear very large indeed. But insurance has never been cheaper than it is today.
Why insurance is important, you never know when you might need it.
Insurance is viewed by many as a necessary evil, in the perfect world it would be nice to be covered for everything but unless you have several thousand dollars to cover the premium that is just not feasible in the real world.
What should insurance cover? Most people use insurance to cover their debts i.e. their mortgage and this isn’t just the accident cover that the mortgage broker or bank will try and sell you at point of entry. You need life cover to pay off the debt in the unfortunate event of your death. Then if possible it would be nice to give a lump sum to help your partner or children through their life – this could cover educational fees or setting up a business for your now single partner. The alternative is a possible forced sale of the property to cover the debt which just adds to the current stress levels.
The most important asset you have is your income but very few people cover this, ask yourself what would happen if your income ceased today? You need cover for this, but which type indemnity or agreed value, put simply do you want to know how much the insurance company will pay out at claim time or do you want to have to provide proof at time of claim? I know which one I would prefer.
Health is another area to cover, not the whole shooting match but just the basics, hospital and specialist should suffice, you can get a more comprehensive package but it all costs.
Trauma and Total Disability, certainly in today’s world there is much more Trauma, and if you had a stroke how would you cope? I suspect it would be difficult but if you had a lump sum payment of say $20,000 it might just make life a little easier over the near term. What this does is gives you time to sort out your situation rather than being pressed into a hurried decision which you may regret at a latter date.
What insurance does is gives peace of mind that if the unfortunate happens you and your loved ones will have some financial support to help in the immediate aftermath and this gives you time to arrange your affairs to be able to cope with your new found circumstances.
As an example. I have clients who were finding the life insurance expensive, and wanted to cancel 15 months ago. They called me and we discussed what could happen if the cover was cancelled. They still had some debts to cover and with no insurance they may have to sell their house. We discussed and trimmed the insurance a tad and made some other minor changes but left the level of cover more or less intact. Last week I got a call to say one of the couple has just been diagnosed with terminal cancer, now while this is devastating, because they have the insurance in place the terminal payout will kick in and the ill partner will be able to pass away knowing that their partner will have no financial worries. The grief of the loss of their partner will be tough enough.
What would happen to your family if one of life's unexpected events occurs?
Most people don’t think twice about insuring their car or house just in case something happens, but unfortunately many New Zealanders don’t consider the implications if something happened to them or their income.
How would you cope financially if you couldn’t work or had big medical bills to pay?
It makes sense to protect the things you care about most in life, which may be your ability to earn an income, your health, your family or a combination of these things.
The one financial product nobody likes talking about it is “life insurance”. The only important statistic is that 100% of us will die, and nobody wants to think about that. Even though everybody eventually dies it doesn’t mean that everyone needs life insurance.
Some people don’t need life insurance, but others do. How do you know if it’s you?
Life insurance is unnecessary if you have no dependents and no liabilities that your existing estate can’t meet. If there is nobody financially dependent on you then there is no real financial loss to anybody else. There are 2 possible exceptions to this generalisation however.
Sometimes a lender wants insurance as extra lending security, and so a new homeowner might have to take out life cover to get the loan. Also, some people might have family medical history that makes it harder to get insurance later in life, so it may be worthwhile getting life insurance while young and healthy, before they actually have dependents.
Life insurance must be considered though when someone else is dependent on your financial contribution. In plain English: if you weren’t around anymore, but your earnings are still needed, then you should have life insurance. There is just no other product that will deliver enough money to your family when you are gone.
So if you know you need some cover the key question is simply “how much?”
There are several ways of working out what is an appropriate amount and they all have some merit, but can provide a wide range of possibilities. The best starting point though is a DIY “needs analysis”, and you don’t need special training to get started.
Just pretend you aren’t here any more, then have your partner work out what they need coming into the household starting next week. Establish the living expenses required, less what your partner will reliably be able to bring in (remembering that you aren’t here to help). Then decide how long you will need that regular amount coming in for (a limited time, until retirement, or?)
Next you think about what last expenses are required (lawyers and estate settlement, funeral expenses, etc.)? What loans or liabilities need to be removed? Is there a need for an emergency fund to see the rest of the family through for a period? If so, how much? Is other capital needed for other purposes, such as children’s education, or your partner’s retirement fund?
The process is really that easy - “spend the money”. It isn’t morbid either – it is quite analytical and very practical. It is also an excellent way of making sure you talk about your estate planning, and know what each other wants when the time comes.
Your partner does the same exercise next, and it may be that you both come up with different amounts of cover required. That is fine, and just because less insurance is required for one person in a partnership it does not diminish their value or mean they are worth less in the family. This is just about working out the financial help needed from an insurance policy. You should be working out what you need and only pay for that, not what is politically correct.
At this point you will have come up with what probably seems to be a couple of large numbers. Don’t let that put you off – life insurance has never been cheaper than it is today, and it is very affordable.
Life insurance really is for the living – the survivors. Make sure there is enough available for them to survive financially, so that the only thing they are missing is you.
Imagine if your employer gave you choice in the salary package that you could take.
For example, what if you were given the following to choose from?
a. Annual Salary = $50,000 plus 4 weeks annual leave, plus 7 days annual sick leave; OR;
b. Annual salary = $48,500, plus 4 weeks annual leave, plus 7 days annual sick leave PLUS 75% of your income is guaranteed until age 65 if you get too sick (or hurt) to be able to come back to work again.
Think about your choice carefully.
You could get paid the top salary and take all the risk yourself of being able to go to work each day and continue earning an income. Or you could forego a little of the income – but not your other employment benefits – in return for a guarantee that regardless of what happens to your future health you will keep earning money through your working life.
That is an enormous amount of potential risk that you can pass to somebody else if you want to, or you can choose to keep all the income and all the risk for yourself.
Put some simple numbers around it to help weigh up the options. If you are 45 and earning $50,000 p.a. through until age 65 then that is an even $1,000,000 in future income at risk – all dependent on you staying healthy and being able to go to work of course. Would you be willing to trade perhaps 3% of that to secure most of your future income for the rest of your working life?
Your employer wouldn’t ordinarily give you this choice, but you can arrange the package with a little help. The difficulty most of us have is not actually making the choice; it’s knowing what choices we have. Working out what is really at stake, what the chances are of different things happening, and working out what “risk management” strategies can be used is where [we] [THE ADVISER] can help.
Income Protection Insurance is not the only consideration. Your entire personal financial situation is critical in identifying the right moves – Bill Gates doesn’t need insurance, but he still uses a financial adviser to work out what his choices are. In working out your best strategy you will need to take into account things like ACC and other benefit assistance. For example, WINZ provide a Sickness Benefit – if you are a single person you can get $225.03 per week (before tax), which might be enough. If you are married the benefit is much more generous at $375.04 per week (before tax).
If the benefit assistance doesn’t seem enough for you then you might want to review what is enough. Calculate what is actually at risk, what choices you have for managing it, what the cost of transferring it to another party is, and then be able to make an objective decision about the best “package of benefits” you can give yourself.
The ability to have salary certainty even if you are unable to work because of illness or accident during your working life is not actually something your employer can take care of for you. It is your choice on how you use your salary package, and what risks you keep though. It is also without doubt an area where sound financial advice can provide enormous certainty and value for you.
Reference: Sickness Benefit details Work & Income NZ, at 1 April 2011
Life insurance pays a lump sum or monthly payment in the event of death or terminal illness.
We have a range of solutions that can give you peace of mind. They are simple, straightforward and affordable plans that can be tailored to your situation. The plans are also flexible, so as life changes so can your level of protection.
What is Life & Life Income Cover? A lump sum or monthly payment in the event of death or terminal illness.
Why do you need it?
If you died, how would your family cope financially? What do you want for their future?
You could use your Life Insurance Cover to:
replace a lost income
provide financial 'breathing space' while coming to terms with the loss of a loved one
give a surviving parent or guardian the option to be able to stay home with the children
pay off the mortgage and any other debts you may have
set aside a nest egg for a surviving partner's retirement
cover the costs of education and healthcare for your family
as a minimum, use it to cover the cost of a funeral.
Would you prefer Life Insurance to pay the family an income?
One of the innovations in life insurance in recent years that remains a bit of a mystery to many is a type known as “Family Income”, or “Family Protection”. It is life insurance that works the same way as other types of life insurance to get a claim, but the method of paying it out is very different. Instead of paying one large lump sum of insurance to a grieving family, it pays it out an agreed rate per year, for an agreed number of years.
Many families would far rather receive a regular income over a period of time, rather than that one large lump sum. For many, it seems as though the money magically lasts longer as it is far easier to budget and use the payment wisely. When a family has a life insurance claim, no matter which family member it is that has passed away, it is a time of the worst emotional stress.