Continuity of Cover

Continuity of cover refers to situations where the origins of an insured event can be traced back to the period of time during which a previous policy applied. It is critical that any new insurance policy be prepared to accept liability for any such events, rather than exclude such events. The reason for this is obvious: if there is no such continuity,  the insured person may find themselves unable to make a claim.

Murphy’s Law is the one to remember here: if something can go wrong, eventually it will. This, of course, is a general principle that can often be overlooked: things with a low probability of happening, still happen. (Forrest Gump was more prosaic: &*#$ Happens!)

All insurance advisers always remember this principle. This is because they know that, if they advise enough clients, then they can be sure that a claim will eventually be made. That is why a prudent adviser assumes that every policy that they recommend will be the one that results in a claim. So, when a quality adviser provides a service, they work backwards from the point of a claim and identify everything that needs to be done in order for a claim to be successful – and then ensure that these things are in place.

You can make use of this approach as well. When taking out insurance – any form of insurance – make sure that you disclose everything about your health and other relevant situations. Imagine that the insured event has already happened and you are making a claim. No insurer is going to pay out a large sum without investigating the policy and seeing if there are any grounds for not paying. Insurers look for loopholes: that is just a commercial reality.  They need to be sure that are paying genuine claim, or else they would go broke and not pay any claims.  Any non-disclosure on your part may render the premiums you pay potentially useless. At best, non-disclosure means that you – or your bereaved loved ones – will have a fight on your hands.

So, remember Forrest’s advise: &*#$ Happens. Assume it has and ask yourself: am I actually insured for that?

The information on this posting contains general information and does not take into account your personal objectives, financial situation or needs. It is important that you consider your own situation before acting on any information contained in this blog post. 
We recommend that you consult a licensed or authorised financial adviser, such as ourselves, if you require financial advice that takes into account your personal circumstances. 

Insurance that you never knew you had

A few years ago, a fellow adviser  was referred a client from a health professional.  This client, in his mid-thirties, had experienced a brain tumour and had required corrective surgery. The client had gone to see a psychologist, and in the course of his counselling, it was revealed that the client was in dire financial straits. He could not hold down a job (the treatment had left him with what was later diagnosed as an acquired brain injury, or ABI), and his new wife was pregnant with twins. His ABI meant that he found it difficult to organise help for himself, so his psychologist agreed to accompany him to a meeting with a financial adviser.

As it turned out, prior to the tumour this client had worked in various labouring roles. These roles necessitated super guarantee contributions into several funds. All of these funds had default level TPD insurance, and to cut a long story short, this client was entitled to a total of $125,000 in insurance payments.

Can you imagine the relief for him and his young wife when they realised that cheques for that amount were on their way?

The client was referred to his bulk billing psychologist by his bulk billing GP. What a fortuitous referral that turned out to be! And well-played to the psychologist for his financial savvy.  The client thought he was getting help with his depression. He was, too: $125,000 was the best anti-depressant he ever received.

The same adviser took great pleasure in helping another client who was referred by a medical doctor. This client has a son who had died in a car accident. There was nothing the adviser could do to take that pain away. But he could assist his client to realise that his son had a default life insurance policy worth $200,000. The payment went to his next of kin (in this case, his dad), who put it aside for later use. And the use to which he put the money? Buying the safest car he could find when each of his remaining children turned 18. Some small comfort out of a horrible situation.

These were cases where the client had default cover within a super fund. We also listened intently recently as a fellow adviser told us about a client of his for whom he fought a five year battle to have their claim for TPD accepted. In this case, the client ended up with a seven-figure payment. Which is exactly as it should be – after all, she had paid her premiums for many years.

One of the best parts of a financial adviser’s job: helping people make a potential claim and seeing their relief when the insurance that they have paid for comes to fruition. So, if you or someone you know may have a reason to make a claim on their life insurance policy, why not make contact with us and let us see if we can help them?

The information on this posting contains general information and does not take into account your personal objectives, financial situation or needs. It is important that you consider your own situation before acting on any information contained in this blog post. 
We recommend that you consult a licensed or authorised financial adviser, such as ourselves, if you require financial advice that takes into account your personal circumstances. 

Some good advice that’s boring

‘Save first, spend what’s left.’ This is great advice. It’s also the opposite to what most people do, which is ‘spend first, save what’s left.’

The second strategy has an obvious problem: what happens if there is nothing left after spending?

The answer, of course, is that nothing gets saved. And if nothing gets saved, nothing of any value gets bought. No home, no decent holiday, no seed money for your own business (the best way to become wealthy, by the way).

Which is why financially successful people save first, and spend what’s left. The good news is that modern technology gives us all a very easy way to do just that. We call this strategy ‘set and forget.’ It is nothing more sophisticated – and nothing more difficult – than setting up a system of bank accounts and direct debits. And then forgetting about them.

First you need to set up a few accounts.  NO fee accounts are always the best.  One will be for your bills, one for your savings and one for your daily spending (you can add more if you want to have an account for things like trips, cars etc).  How long did that take?  Half an hour?  Now, sit back and have a drink... its time to get this working.

Direct debit is a really convenient way of ensuring you pay all your essential bills. When you organise for bills to be paid by direct debit, all you have to do is make sure you have enough money in your account on the day the payment is due. To make this less of a challenge, we have an account that is dedicated to your bills.  All you need to know is what is coming out and transfer that amount in the day after pay day.  This gives you much less time to go spending before the bills are due.

(There is one word of warning when it comes to direct debit: make sure you actually check the bills that you are paying each month. You want to make sure prices have not risen without you realising, and that you are only being charged what you actually wanted. Hello, mobile phone company…)

The ‘trick’ then becomes to treat your savings plan like a normal bill that has to be paid regularly. A direct debit that has to be made each payday. Rent? Tick. Phone? Tick. Savings? Tick.  

Let’s say you arrange for an extra $200 to be transferred each fortnight into a savings account that is hard to access (or, at least, that is hard to access at 1am on Sunday morning). By the end of the year, you would have saved $5,200 plus any interest that you might be able to pick up.  All you have to do is keep getting paid and the saving occurs automatically. You set, and then forget.

Now we have your bills paid, your savings set, how about some spending money for the bottle of vino on a Friday night?  Done.  That last account (well if you set up three) is you daily spending account.  This is where the day to day living expenses come from.  Think shopping, vino and those Friday drinks that end up going on until you....we you get the idea.  This should be the only account that is easy to get to. The only one with an ATM card.  And this is the one that you need to watch, cause once its gone, its gone!

The next step is also a simple one: make your savings hard to spend. This basically means making them hard to get to. A simple way to do this is to create a dedicated savings account with another bank. If you bank with the NAB, get a savings account with Westpac. If you bank with Westpac, get a savings account with the ANZ. Make this your one and only account with that bank. Go for the highest interest-earning account you can get (this will depend on how much you already have saved).

Then – and this is really important – get rid of any plastic card that comes attached to the new account. Make the money in that account hard to spend. Make it so that you have to transfer the money somewhere else before you can spend it. This will means transferring money from one bank to another, which usually takes at least 24 hours. Bye bye impulse spending.

Some people take the idea a step further and don’t even set up internet and phone banking for the new savings account. The only way to get money out of this kind of account is to physically go into a branch during business hours. And branches are not open on weekends. Certainly not at 1am every Sunday morning.

This is just one way to go about forcing yourself to save. There are various others. But they all have one thing in common: you have to automate the saving – and then make it hard to access those savings.

That is the simplest way to save first, and only spend what’s left. Save without thinking.