The impact of Covid19 on our health & economy will be wide-ranging, and many of you may be looking at your ability to cope financially and try to manage priorities in this stressful environment.
One of those expenses is Insurance, and sometimes it’s the first expense to be considered for savings because we don’t see any current tangible benefit, but it’s important to prioritize what is most important for your family and consider the reasons you put insurance in place in the first place.
The purpose of insurance is to help you effectively manage the risks you are exposed to in life. The main enemy of life is uncertainties and one can plan for the uncertainties in life with insurance.
The risk of falling sick and being unable to support your family, or the risk of your own death and more can be dealt with an effective insurance policy.
You may well be reviewing your situation and considering:
- Your health & your families health needs now and in the future
- Affordability of premiums (if you have lost your job or are on reduced income)
- Do your insurance policies offer any benefits or assistance to help.
How do you check what you’re covered for?
The best way to check what insurances you have in place and what you are covered for is to review the policy wording and insurance schedule that you received when you took out your cover. This will show you:
- The type of insurance cover you have
- What conditions or scenarios you can claim for and the criteria you would need to meet
- If there are any exclusions or limits
If you are unsure of the features, benefits & policy wordings, call your Insurance Adviser. They are the specialists in this area and can walk you through the benefits that you may have, or the most suitable options for you and your personal financial situation.
It’s important to note that there is a chance that pandemics like Covid19 may be excluded from insurance cover, but this may not be the case with all insurers, or for all insurance benefits.
What Insurance benefits may be available within your existing policies?
Each insurance policy is different as they have usually been personalized for your specific situation, and may have benefits and exclusions that are specific to each person covered, so the first thing to do is to find and read your policy document and any attached schedules.
If you are unsure of any of the wordings, talk to your adviser who will be able to clarify this for you.
What kind of cover and benefits do the insurance products provide?
The following information is a generic description of some products / benefits and may or may not be part of your personalized insurance cover. This is not an exclusive or full list. Your insurance policies, features and benefits will be detailed in your Insurance policy document and any attached schedule. Alternatively contact your Adviser or Insurer for full detailed information.
Life Insurance
As Life insurance is a lump sum payment death benefit, if you passed away with Covid19, your estate, or policy owner should receive payment if the claim is approved.
Income / Mortgage Protection
The benefit is a regular payment paid if you are unable to work due to illness or accident. Covid19 is an illness, so if you become ill with Covid19, you may be covered under the illness or disability policy.
However, for some policies, your payment may be offset against other income such as the wage subsidy or other financial support, so you could receive a reduced benefit under the insurance policy. There may also be an exclusion if your policy does not cover a global pandemic.
Once the pandemic is over, If you have any ongoing health issues that impact your ability to earn or pay your mortgage as a result of having and recovering from Covid19, these may also be covered.
There is usually a wait period from the time you apply, and your claim is approved, so if your claim is approved, it may be weeks or months before a payment commences. As most wait periods are 30 days or more, it would be unusual for someone to be incapacitated by COVID-19 beyond their wait period.
Health Insurance
If you require hospital treatment due to the Covid19 virus, your condition will most likely require Acute care. In New Zealand, our Public healthcare system provides acute care, and as such may be excluded within your Healthcare policy. Acute care is a sign, symptom, condition or disease that requires immediate emergency care in a public hospital. So, if you need emergency treatment for COVID-19, it will be provided in a public hospital for free.
In addition, testing for COVID-19 is provided only through the public health system for free.
However, if as a result of Covid19 you have developed a condition that requires further treatment, there may be cover for a payment or benefit under your health insurance, if it hasn’t been excluded.
Trauma Insurance
Trauma cover is Lump Sum payment for a range of qualifying conditions. You would need to check your policy to see if it covers any health conditions that you may have to live with going forward after you have recovered from the Covid19 virus.
Redundancy Insurance / benefit
Redundancy cover may be linked to your Income protection policy and would usually be a regular payment. You will need to provide evidence you have been made redundant and if approved, there is likely to be a delay in payment as there may be a wait period detailed in your policy.
Other Insurance policies / benefits
There are a range of other insurance solutions that pay a Lump Sum or regular payment, for example Funeral Cover, Living Expenses, Hospital expenses that are available in the market. Some provide a lump sum, and some provide a regular payment for a certain time after a wait period. Its best you check the cover you have in place to see if there are policies or benefits that you hold that may offer some help for you
How would your Insurer consider a claim as a result of Covid19?
The process would be no different when assessing any claim.
You’ll simply need to meet the eligibility requirements for your type of cover and any special terms and conditions applied to your individual policy.
What could you do if you are struggling to pay your bills?
If you experience difficulty in paying your expenses, it’s important to prioritize what is most important for your family and when it comes to insurance, consider the reasons you put insurance in place in the first place.
Before you make a decision to cut costs by cancelling your insurance, consider the following:
- Get in touch with your Adviser or Insurer to see how they can do to help you.
- Ask if you are be able to suspend payments for a period, (i.e. due to unemployment) but this may only be available if you have this option detailed within your policy wordings.
- Review your budget and see if there are any cost savings you can make on other items, so you can still afford the insurance you need to protect your family.
If you cancel your insurance, can you still get the same cover reinstated in the future?
You may be able to apply for insurance again in the future, but it will usually require updated medical checks and disclosure of any health conditions or accidents for yourself or your family.
If your health is the same as when you originally took out the policy that you cancelled, then your cover may be similar. However, if you have developed health conditions, or had any accidents since that time, these may be excluded or have a premium loading for any new insurance.
If you did decide to proceed with cancelling a policy because of financial difficulty, you may find it difficult to get again with the pre-Covid-19 benefits still in place as Policy conditions change over time, and future policy wordings may limit or exclude pandemic scenarios.
Policy ownership
It would be advisable to check who the policy owner is on your policy, because the Policy owner is the authorized person to make changes to your insurance policies.
What does ‘policy owner’ mean?
When you set up an Insurance Policy, there are two “parties” to understand, the Life Insured and the Policy Owner.
The Life Insured is the person whose life is covered. If this person dies, or suffers anything else that qualifies for a claim, a claim will be paid.
The Policy Owner (or owners) is the person who receives the money from the claim, and is the person, (or persons) who can change or cancel a policy
The Policy Owner may be the same person as the Life Insured. In which case when that person dies the money will go to their estate. If the estate goes through probate or takes some time to settle, the beneficiaries of the Life Insured may have months to wait until the proceeds of the Life Insurance are processed and paid out to the estate.
If there is a specific policy owner, or owners appointed, such as your spouse or partner, the policy proceeds can be paid directly to the owner once a claim has been approved. This significantly speeds up your family’s access to insurance proceeds.
Financial Advice New Zealand is here to help
In these uncertain and challenging times, good quality financial advice is more important than ever. If you want to talk to a quality financial adviser, reach out to a Financial Advice NZ member today. https://financialadvice.nz/find-an-adviser/
