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There’s more to Life than Financial Strength

You’d have to say the Financial Strength Rating an insurance company has is an important factor in considering who to place your insurance with and most right thinking people know this to be intuitively correct.

In the case of a life insurance policy (or health, income protection and  trauma insurance for that matter) you need some reassurance that the company will be around in 5, 10 or perhaps even 30 or 40 years time to honour a claim you might make on a policy that you’ve been paying premiums on for a long time. You want to be sure the company is still going to be around to pay your claim in the future, don’t you?

Which is where financial strength ratings come in. They provide a kind of gauge so that the man on the street can get a handle on whether a company is ‘good for it’ or not.

But just as the Heart Foundation Tick is no guarantee that the food you eat won’t kill you so a financial strength rating is not a rock solid guarantee that the company will be around to honour a claim. Still, a rating system has plenty of merit – if you’re able to get a high rating then for the layman it makes a pretty good arbiter of longevity.

When it comes to insurance, financial strength can’t be considered properly without thinking about Reinsurance at the same time.

Reinsurance describes a situation where your insurance company passes on a portion of the responsibility for paying claims to another insurance company, usually in exchange for a portion of the premium you pay. This is a totally normal arrangement in both the life insurance and general insurance industries and makes a lot of sense because the load is shared between two or more companies at claim time. Reinsurance will be very important if lots of claims come in at once and by spreading the load in this way it should actually enhance a company’s financial strength. Having said that, good reinsurance arrangements on their own don’t always translate into a high rating. Hence the title of this post – there’s more to life than a financial strength rating.

Naturally enough cost and what you’re covered for are the primary considerations when choosing which insurer to go with and the final decision is often backed by a recommendation from a trusted person. The reality is that an insurers financial strength is not always considered even though it should be.

 

Baby boomers going bust?

Picture this: You’re aged 60 and semi-retired (no it’s not a Tui ad…)

Your retirement plans are well advanced with money sitting in various investments or your rental properties are now starting to produce income after years of mortgage payments. You’re feeling quietly confident that you can retire in relative comfort in 5 years if you choose. You’ve worked hard all these years, raised a family and so on and a comfortable retirement is certainly well earned.

Now imagine your 35 year old daughter, a single mother of 2 comes to you to say she’s been diagnosed with breast cancer. After getting over the shock you discover she doesn’t have any Trauma cover. Or income protection. And she forgot to renew her medical insurance.

Most baby boomers would think nothing of helping their children in such a situation. Even if it meant irreparable damage to their retirement savings plans that were about to bear real fruit. But wouldn’t it be nice if it didn’t have to get to that stage?

Baby boomers! You have an opportunity to protect yourself and your children’s financial position by opening the conversation about insurance with them. Suggest they speak to us about covering their mortgages and providing for their children. Just like you did.

 

Medical Insurance Treatment Costs

Doctor and nurses

It can be hard trying to justify buying medical insurance. Especially if you’re one of the legendary few who never go to the doctor and haven’t had a day off work in you’re life.  If that’s you, congratulations you statistical anomaly you.

For the rest of us who aren’t superhuman there’s a pretty good chance we’ll have some form of treatment in our lives. And when I say ‘pretty good chance’ the $828 million paid out in health insurance claims to March 2011** should give you an idea how likely it is that something will happen to you.

In my own case I’ve had a minor surgery and a handful of specialist appointments in recent years. All up the cost was around $6000 and was incurred prior to me turning 32 (I’m 36 now).

My wife has had back surgery, the attendant specialist appointments, a few laparoscopies and some other bits and pieces. Her bill is a bit higher (more like $30,000) and like me she’s under 40 years old too.

There’s no way we’ve paid $36,000 in total insurance premiums let alone just medical insurance premiums so it’s been a pretty good investment for us. Likewise, we don’t have $36,000 just sitting around to cover this kind of thing either, I don’t know many people who do!

Take a look at this Surgery cost guide that we picked up from Onepath. Maybe medical cover is worth looking into more closely?

 

**As reported by the Health Funds Association of NZ in their June 2011 newsletter

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