Do you have your ducks in a row?

Late last year, my colleague, Hamish met with a GP to discuss retirement planning, and offered as part of our services, a review of his insurances.  He was the primary income earner in his family as his wife had retired, their children ranged from young adults to 2 still attending secondary school, and whilst the family home was mortgage free, there was a sizeable amount of debt owing on their holiday home. Given these insurances had been put in place over 5 years ago and he had not met or heard from the adviser since then, our client felt it made good sense. 

His plan was comprehensive in that it had life insurance, trauma cover, a sum of income protection and health insurance for each of the children. There were however a number of changes that could be made that greatly enhanced the effectiveness of it – that did not involve more expense…. in fact we saved money. 

  1. The policy had life cover in force which was there for his wife yet she was not an owner of the policy.  As such there would have been a delay in the funds getting to her as his estate would have to be settled and the will clearly state that she was the beneficiary of his estate before she would receive the proceeds of the policy.  We completed a very simple form which made them joint owners of the policy and therefore alleviated any delays and financial stress should they ever need to claim. 
  2. In the event he could not work, the income protection benefit only related to a very small percentage of actual income.  In talking this through, our client was confident that they could live on less than he actually earns but acknowledged that they did need more than was currently insured.  As such we applied for an increase of $4,000 per month to ensure that if he was disabled there would be no financial stress on the household. 
  3. The income protection and trauma cover had a loading of 50% – this means the insurer was charging an additional 50% on the premiums.  I asked our client why there was a loading.  He could not recall as he enjoyed great health – further investigation found that previously his blood pressure was elevated and BMI had been high.  A change in lifestyle some years ago had brought both these issues under control and as such, this loading was no longer applicable.  We applied to have the loading removed and thereby reduced the monthly premium. 
  4. There was a nil excess on the medical cover – this family had good cash reserves and could meet the cost of an excess – especially given the excess was only charged once per person per claims year.  We therefore increased the excess and further reduced the monthly outgoing. 
  5. The client’s insurer was one we work with and have respect for due to the strong policy wordings and their delivery at claim time – as such these changes were made to the existing policy.  To ensure they had an adviser they could call in the event of a claim, we took over as the servicing adviser of the policy. 
  6. The financial success of their household was inextricably linked to this client’s business success.  As such it was really important to have a robust insurance plan in place for each of the shareholders of the practice.  The business is based in a small rural town – if one of the shareholders passed away or was unable to work ever again, how easily could they find a replacement and/or could the other shareholders buy out the deceased’s share of the business without taking on additional personal debt?  In discussing these issues, it became evident that there is a good business plan in place which was great. 

A real concern with insurance plans set up to mitigate business risk is that they too are not reviewed on an ongoing basis and therefore do not reflect the current value of the business.   In this situation, it can be like an old style medical insurance policy that covers 80% of the cost – the insured can still be left very exposed! 

So – do you think you have your ducks in a row or do you have your head in the sand??   We are happy to meet with you and review the current structure to ensure it meets your current personal and business situation!