Have you noticed the ever-growing frequency of sad stories around folk trapped overseas with large medical bills, or a family struggling to bring a loved one home for a funeral, and all they can do is start a crowd funding page?
Insurance is something that a lot of people don’t prioritise – but they should.
It’s counter-intuitive. We’re putting money into something we might not need, or use, just in case. As human beings, we tend to inherently believe bad things won’t happen to us personally. In a study on optimism bias, 80-90% of all drivers surveyed thought they were a better-than-average driver.[i]
You don’t have to be good at maths to see that this doesn’t quite add up.
Our optimism bias means we disregard the reality of a situation, because we think we’re the exception to the rule. Not having a comprehensive insurance cover is a prime example of this.
Health Insurance
Here in little old God’s Own, we have a certain amount of security for accidents from ACC. However... we don’t have as much protection from that as you might think. A survey from Partners Life showed confusion over what the ACC scheme actually covered, especially with those in the 18-24 age bracket.[ii]
Think of it this way - if you get a physical injury from an accident, you’re likely covered. If you get appendicitis and need emergency healthcare, you’re at the mercy of the state healthcare system.[iii]
ACC is the ambulance at the bottom of the hill, which only takes on certain cases under specific circumstances. Great to have if you qualify, and certainly better than nothing at all, but not a universal solution to any unforseen medical events.
Health insurance can also help you get ahead of the queue you face for specialist appointments in the public system. Post-lockdown, the number of people waiting more than four months for their first appointment with a hospital specialist had doubled. Having private health insurance enables you to get out of the public queue, which can offer you more options and a speedier process. This is particularly valuable in diagnosing things like cancer, which is the leading cause of death in NZ currently.[iv]
Home & Contents
In June, a duplex in Havelock North burned down and two families lost everything bar the clothes on their backs. Shortly after, GoFundMe pages for both families popped up. The community rallied and exceeded the donations goal for one family – but the other fundraiser fell well short of its identical $5,000 goal. This could be for any myriad of reasons, but it does illustrate that whenever you’re crowd-sourcing in an emergency... you’re depending on the generosity others, and this is not a reliable supply of funding post-disaster.[v]
There’s a lot to deal with when your house burns down without having a fiscal burden added to the already heavy emotional toll of the event.
Given the rise in the cost of premiums over the past year or so, it’s understandable that full cover is a daunting prospect. But if you can, do. And if you can’t, look at what you could do instead – for example, renters would be smart to get contents insurance for their belongings as these are the assets they would have to replace should the worst happen.
Life Insurance
This is not something just for the elderly. I think in people’s minds, it’s just another thing like retirement – i.e., something to be pushed back for ‘someday’. Again, it speaks to that pesky optimism bias as people put off getting life insurance because they believe they won’t need it.
Benjamin Franklin famously said, “Nothing is certain in life except death and taxes.” We know we are going to die, we just don’t know when. Life insurance covers the loved ones you leave behind.
In the Partners Life research, 58% of New Zealanders surveyed indicated they were not likely to get life insurance. According to Statistics New Zealand, however, about 20% of Kiwis pass away between the ages of 18 and 65.[vi] So regardless of sentiment, there’s clearly a need at any age and any phase.
Travel Insurance
As I mentioned at the top of the article, there seems to have been an increase in Kiwis trapped overseas with large medical bills. A recent traveller to the US from NZ ended up with a $230k medical bill after not sorting insurance prior to departure... again, a GoFundMe was created to help her pay enormous debt off.[vii]
As borders open and Kiwis start to fly again, it’s vital you take into account that the worst just might happen. Travel insurance is a Godsend in those situations. The last thing you need to worry about if you’re sick and just trying to get well and get home, is incurring a huge fee in a foreign currency.
Insurance in some form is an ancient concept. Evidence shows us that ancient Greeks had contracts to cover shipments lost at sea, while Romans also had burial societies to cover funeral costs out of monthly dues.[viii] While I don’t think everything from ancient societies is worth replicating – those Roman lead pipes weren’t the best idea - protecting what’s yours, including your own wellbeing, is important and worth doing.
We are fortunate to have a strong insurance market in New Zealand, and there is an array of other products (additional to those mentioned here) which can offer support through the different phases and challenges of your life.
Like all things financial, you want to make sure you have a plan that takes into account your current situation, any dependents, and your future. If you’re not sure where to start or would like a second opinion, sitting down for a chat with trusted risk insurance professionals is always a good first step.
· Nick Stewart is a Financial Adviser and CEO at Stewart Group, a Hawkes Bay and Wellington-based CEFEX certified financial planning and advisory firm.
· The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz
[i] https://ekuonline.eku.edu/blog/psychology/optimism-bias/
[ii] https://riskinfonz.co.nz/2022/08/17/almost-60-of-kiwis-not-looking-to-obtain-life-cover/
[iii] https://www.acc.co.nz/im-injured/what-we-cover/injuries-we-dont-cover/
[iv] https://www.beehive.govt.nz/release/nationwide-plan-tackle-hospital-waiting-lists
[v] https://kawarthanow.com/2022/06/20/havelock-family-loses-everything-in-sunday-house-fire/
[vi] https://www.partnerslife.co.nz/why-insurance
[vii] https://www.nzherald.co.nz/talanoa/auckland-womans-warning-to-travellers-after-life-changing-mistake-led-to-230k-medical-bill/X7HYT2ISYZGBM3CTFCJRNVE2RQ/
[viii] https://www.britannica.com/topic/insurance/Historical-development-of-insurance
