No one knows what our lives will bring; that’s why it’s important to have a solid financial plan to create, protect and grow your wealth. But what exactly is a financial plan and how do you go about getting one? The three client case studies are fictitious but their issues are common to many of us.
TALIA is 65 and worked as a secondary school teacher. She has just sold her house in Auckland and retired to New Plymouth where she is now mortgage free with money to invest. Talia has 4 adult children and 3 grandchildren.
Talia is a firm believer in having health insurance. When her husband was battling cancer, having medical insurance meant they were able to access medical treatments not funded through the public system.
Now Talia has retired, she wants to protect her retirement nest egg against big nasty expenses like unexpected health issues. For a hip replacement these days you don’t get much change out of $30,000 and the public system completed 10,775 in 2014 totalling $323 million. Waiting lists up to 3 years long are also an issue, so for most people self-insuring isn’t really an option.
But because Talia’s getting older, her premiums have in-creased. So how is she going to keep her medical cover affordable? Her best option at this stage is to increase her excess. The higher the excess, the lower the premiums so Talia has decided to opt for a reasonably large excess of $5,000. This has reduced her premium considerably by 54%, saving her $440 per month or $5,280 per year!
Talia has already set up a rainy day ‘fit it up’ account so when she does need to make a claim for major surgery or medical treatment, it won’t break the bank.
Top tip: New Zealand has a good public health system, especially in an emergency. But when you are faced with a long waiting list or need non PHARMAC funded treatments, medical insurance is invaluable.
JEFF & NICKI are both in their late 40’s and are in the process of getting divorced. Jeff runs a family building company with his father and 2 brothers in Nelson. They have 2 teenage children.
Luckily, Jeff’s health insurance is and will continue to be covered by his business work scheme. Nicki pays for her own private health policy but has been thinking about cancelling it now she’s going to be living on one wage.
However, after discussing this with her sister Julie, Nicki has decided to keep her policy but make a few changes to significantly reduce the premiums. Her current policy includes ‘additional options’ that cover specialist consultations, GP visits, prescriptions, dental and optical work. The amount she pays for these extras adds up to a whopping $2,160 per year. And yet she would very rarely ever claim more than $500 per year back. And she doesn’t even wear glasses!
At this turning point in her life, Nicki needs to at least make sure the big stuff is covered while trying to manage costs. She read in an article recently that the top claim by a client at a large insurer last year was $160,000 for a spinal operation. She couldn’t afford this or afford to be on a waiting list. As long as she has a policy with Base Cover, she can rest assured that she’d be well looked after if anything major happened to her health.
Top tip: Medical treatment is expensive and there can be long waiting times. There are options to help reduce your premiums, so consider them and ask for advice.
BEN & KEIRA are both in their late 30’s and have just moved back to NZ after living in the UK for the last 12 years. They have 3 children and have moved to the Wairarapa to take over the family sheep farm from Ben’s parents.
Upon returning to New Zealand, one of Ben and Keira’s first priorities was to sort out their medical insurance. They’re both young and in good health but were inspired by Keira’s Aunt Louise.
Louise lives in New Zealand, but travelled to South Korea where she received lifesaving treatment for an extremely rare type of cancer. Unfortunately, the medication Louise needed for her treatment was not funded in New Zealand as it’s a non-Pharmac drug. The family set up a Give-a-little page and raised over $200,000 to send her overseas. Luckily, the treatment has been successful and Louise is finally in remission.
The public health system does a great job funding 95% of conditions that are common in New Zealand. But there is a limited amount of funding it can provide to pay for new medicines that become available. Unfortunately, this means some extremely specialised treatments are not covered by the public health system, as we just don’t have the population size in New Zealand to support these treatments.
Ben and Keira have specifically chosen a policy with a health insurance company that will cover them for non-Pharmac drugs and treatment overseas if needed.
Top tip: Review your current health policy to ensure you’re covered like you want to be covered! Many older health insurance policies may not cover you for non-Pharmac approved drugs.
Please note this information is of a general nature and this is not intended to be personalised financial advice.
Source: RIVAL Wealth