Category Financial mastery

Did nights out on credit lose me my house?

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Did nights out on credit lose me my house?

Posted by Priscilla Dickinson in Debt is a drag 3 Comments

As a single woman in my 30s, I’d had enough of renting. My home-buyer’s checklist was a small lock up and go, close to the city. In early 2006, I bought a freestanding cottage in Orakei, pouring all my savings into the deposit. While doable, the repayments weren’t a walk in the park.

Having the one income, I settled on a bog-standard, two-year fixed-interest home loan rate over 25 years. Part of the bank’s welcome package was a credit card with a $5,000 limit, interest-free for the first 12 months. I wasn’t sure I’d use it but decided to take advantage of the (seemingly) free finance.

I started using the card for small, frivolous purchases: Friday night drinks, a weekend brunch and shouting the odd coffee. As my spending was scattered, I saw each purchase in isolation – $10 to $20 each time didn’t seem like much.

As the balance crept upward, my card became my back-stop. I had access to spare money and up to a year before thinking about paying it back. Time flew, and after eight months I’d racked up the full $5,000. A lifeline suddenly cut, it was difficult to change how I lived.

When 12 months rolled around, fees seemed to appear thick and fast. A $20 account fee tipped my balance over the limit, triggering a $20 over-limit fee. I found myself trapped in a cycle of paying the minimum balance (often late, with a $20 penalty applied), only to find myself a little short before next payday and redrawing on the debt.

In desperation, I took a second job. I’d come home to multiple boxes stacked at my door, spending evenings folding circulars. It was tiring work for small change, and I developed a swollen wrist to boot.

The extra money helped, but progress was slow. Feeling under pressure, I ultimately decided to put my house on the market. After one year of grappling with interest and fees, I repaid the card and cancelled it.

When I discussed a new home loan pre-approval with the bank, their response was that due to account conduct, I had to wait until my credit rating improved. I’d paid around $6,200 for the $5,000 “interest-free” card (125%), including interest and account and late payment fees.

Finance approval has never been so easy, but it’s not just about the numbers stacking up. If you’re a regular saver and live within your means, a credit card can support your financial situation by covering expenses while offsetting income against a home loan.

If you’re using a card to bridge the gap between paydays or fund last-minute Christmas gifts, it’s critical to consider the full cost – and your resources – to pay it back.

In my experience, it’s easier – and significantly cheaper – to practise patience and cultivate regular saving habits, even for small amounts. There’s no greater feeling than to buy or give someone something knowing you’ve truly earned it.

Is your home underinsured?

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This content originally appeared in the Winter 2018 issue of Juno investing magazine.

Most insurance companies have changed their rules on house rebuild cover. If your home is damaged, there’s now a real risk that you might find yourself with only half the house you expected, says Priscilla Dickinson.

After the Canterbury earthquakes, most residential insurers moved from ‘rebuild’ policies, an open-ended cover based on a square-metre rate, to a capped ‘sum insured’. This means that homeowners are now responsible for calculating their home’s total rebuild cost.

We typically spend years paying off our homes but, when it comes to insuring them, there’s a tendency to underestimate the cost of a total rebuild.

If you haven’t calculated the true cost of rebuilding your home, you could be one of the 85 per cent of homes that could be underinsured, according to a recent Treasury report.

Richard Godman, underwriting manager of Vero Insurance, says a house insurance policy’s purpose is to replace what you’ve lost. “It’s important to get your sum insured right, because it’s the amount that the insurer will pay up to if your home needs to be repaired or replaced.”

As a homeowner, your main priority is to put an accurate value on the rebuild cost of your home. Most insurers have an online calculator for this, but many people get a valuation, just to be sure.

Will a free calculator valuation be enough?

Vero’s ‘Cordell Sum Sure’ calculator asks for the home’s address and then pre-populates all the details for customers to check.

Tower Insurance uses its own version of the Cordell Calculator, available through their website. AMI customers can visit need2know.co.nz.

The calculators allow for demolition (including removal of debris) and professional fees (such as council, architect, surveyor and legal costs). Vero recommends customers keep a copy of their sum insured calculation in case they need to claim on their policy.

Michael Brown, Willis Towers Watson’s national manager, broking, says people often accept a default sum-insured figure.

“When we help our clients, we remind them that most default sum-insured figures are conservative. These should be checked against a valuation or using calculation models. Many people that we talk to haven’t amended their sum insured from the default.”

Is a valuation required for a rebuild estimate?

Although a formal valuation isn’t required, many homeowners may prefer to use a valuer, particularly if their home is built to a high specification.

Willis Towers Watson suggests homeowners with higher-value homes or bespoke features get a valuation, as it will give a more accurate assessment.

“Typically, rebuild values estimated by a registered valuer, quantity surveyor, or builder are higher than the amount generated from the insurer’s calculator,” Brown says.

A valuation is likely to cost you anywhere from NZ$500 plus GST to upwards of NZ$2,000 for a luxury home, but the extra cost could save you thousands at claim time.

Reviewing your policy

It’s good practice to review your sum insured annually, or, as Godman recommends, “When doing anything on your home, such as structural renovations, adding a shed, or garage.”

Tell your insurer about any structural changes, including removal or installation of cladding, roofing, windows, or doors. Some policies include a small limit for building work, but most renovations require a Contract Works policy.

If your home will be vacant for 60 days or more, telling your insurer beforehand allows them to assess and cover any additional risk during that period.

Cover for incidentals and soaring costs

Most house insurance covers incidental costs separately to the sum insured (to specified limits), for example stolen keys, landscaping, and alternative accommodation if the home is uninhabitable.

Many policies have an in-built benefit, called ‘Demand Surge Protection’. This protects homeowners from soaring costs where there’s an increase in demand for materials and labour after widespread loss from an insured event.

A claim can be settled above the sum insured limit if the home’s replacement cost is higher. At Tower’s discretion, ‘House Plus’ customers can receive up to 10 per cent above their sum insured for natural disaster, flood, storm, and the replacement cost for fire.

The ‘SumExtra’ benefit under Vero’s ‘Maxi House’ policy pays up to 10 per cent above the sum insured towards the replacement cost for natural disasters, or the replacement cost for other causes.

Vero’s benefit is automatic, providing customers use the Cordell Calculator, a qualified valuer (or similar) to check the rebuild estimate of their home every three years (or when the size is increased or improved in quality), and keep a copy for their records.

Brown urges homeowners to regularly review their sum insured to ensure it keeps pace with current building costs and to check their policy, as some benefits are not necessarily automatic.

“Willis Towers Watson works with a panel of insurers, and one of the main considerations is their flexibility around replacement cover – not all insurers have equivalent offerings. We want our clients not to have any nasty surprises.”

Less cover? Smaller house

Your home is your biggest asset, therefore insuring it is a necessity. Sum-insured house insurance requires you to set the cost to rebuild your home. If there’s a shortfall, options include borrowing to bridge the gap or using a cash settlement to rebuild a lower-spec home.

By using your insurer’s calculator (or a registered valuer) to calculate the rebuild cost, retaining a copy and reviewing it regularly, you’ll be in the best position to have your home put back good as new.

Budgeting.  The best cure for a financial hangover

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Christmas…it’s family time wrapped in a bow, the time of year when we’re called to take time out from work and other priorities, crawl out from under our rock and spend time re-connecting.

On the down side, retailer noise is at its peak with pressure to spend within a deadline.  Sales are an ideal way to plan Christmas shopping, but they create temptation to over-spend.

Rather than greeting the New Year with a resurgence of credit card fees that can leave us playing catch up for many months afterwards, now is the ideal time to re-commit…to a budget!

You may remember giving in to momentary temptation and buying something you didn’t need – or really like, only to return home, remove the price tag and gulp.  Instant guilt pang.

In my view, having a realistic budget helps to avoid this.  Like dieting, rather than a sudden crackdown on spending, making small and regular cut-backs is the key to success.   Two cups of coffee a day without sugar potentially saves your body from 700 spoonfuls of sugar over a year. It’s those incremental changes over time that make a difference.

Like me, you may have made cut-backs due to a part-time income as you prepare your kids for school.   Rather than being side-lined by the mantra ‘We can’t afford it’, this year, I knuckled down to prepare a family budget to see where the boundaries lay.  Here are a few of my experiences in setting a budget and how it allowed me to actually enjoy my purchases.

What is a budget?

Put simply, a budget represents all personal income (by week or month).  Offset against this are financial commitments. Firstly, fixed expenses such as mortgage repayments (or rent), other debt repayments and living expenses (e.g. food, phone, electricity, cars, water, rates, insurance, school or private kindy/day-care fees). 

Once fixed expenses are documented, there are variable living expenses (e.g. gifts, kids’ parties, haircuts, repairs & maintenance, doctor, dentist, clothing, kids’ hobbies). 

A realistic budget may also include money for entertainment, weekly take-aways, self-cares, donations and, for the handyman at home, a ‘general’ category for those ad-hoc jobs that require an urgent trip to Bunnings!

Why have a budget?

A budget a picture of financial incomings and outgoings.  Having this information in current, summarised form is the roadmap for retirement planning.

Our budget tells me how much is left over after meeting our family’s fixed expenses.  It’s helped me to plan the kids’ hobbies each term, weigh up the day-care versus Kindy decision, even manage the kids’ expectations around birthday parties at Butterfly Creek and Rainbows End!

Having taken heed of it, the budget has rewarded me with robust justification of the odd shopping spree!  Avoiding the label of ‘Miss Frugal’, I’ve been guilty of ‘frittering $20 here and there, only to realise that these extra purchases mounted to a considerable annual sum.  Setting the limits in black and white has required me to think carefully and plan what I buy.  Living (mostly) within rations makes me feel more noble than having a Mastercard Gold!

Make your budget work for you

Following are a few of my own financial faux pas that I have learnt from.

  1. A budget isn’t an automatic ‘license to spend’, but permission to spend up to the prescribed amount (this concept has taken me a while to grasp)! For example, we have a weekly budget for ‘Kids entertainment’, however if I spend all of it during term time, it leaves no wriggle room for over-spending with both kids at home during the school holidays.
  2. It’s tempting to ‘tick up’ personal spending, e.g. a flurry of spending on clothes one month to take advantage of a ‘flash sale’. This makes it difficult to keep the discipline of spending nothing for the duration over-committed time-period, risking derailing the budget.
  3. Revise and revise. Costs and income change, so make a habit of reviewing the budget regularly to keep it realistic.
  4. Keep a log book handy (bag or car). It’s easy to forget purchases made earlier in the month.  Short of going onto internet banking and wading through records, a simple option is to keep a written log book of discretionary purchases (e.g. clothing) with dates and amounts for easy reference.
  5. Every few months, compare the bank balance month-on-month (the day pay/s go through). Investigate over-spending. Was there a ‘big month’ with disproportionate fixed expenses, e.g. a quarterly rates instalment or annual insurance premium?  Trawl internet banking and do a rough tally of spending against the budget categories.  Areas to look for might include top-up grocery shops, impromptu treats for the kids or visits to The Warehouse!
  6. As a budget provides a savings forecast, it’s useful to create a loose plan of where you’ll land at retirement age. Are you on-track to having repaid the mortgage (considering the mortgage term)? What might your savings be? Do you need to save more and where could you cut back today? Although the facts are bound to change, it’s a good grounding exercise to keep one eye on the end goal.

Mindful spending

Having a budget is one thing, sticking to it is quite another.  When writing a budget, I think it’s important to start with a clear picture of why you’re budgeting.  Yes, perhaps the biggest hurdle of all is deciding what you really want!  A first home, dream or beach home, renovation, a car or simply to enjoy an early retirement.  The more personal and tailored the goals, the easier it feels to forgo things now, e.g. a savings goal might be to run the New York marathon within the decade.  Although an earlier retirement would be nice, it may not be enough to curb spending for instant gratification!

Spending money is a rush!  Although by saving, you’re forgoing some things now, your goal needs to be strong enough so that although you said no to buying ‘x’, the amount you’ve saved brings you that much closer to your goal.

Regularly reconnecting yourself to what’s important to you will help you to live within your budget, remembering that little and often is more achievable than large cut-backs.

Let’s raise a toast to great financial (and physical) health.  With a budget to set spending boundaries and the big picture, small changes made little and often and will enable you to enjoy bigger rewards in future.

Merry Christmas and may 2018 land you in great shape.

How to get a good deal on a house

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We live in Auckland, home of the million-dollar average house price.  Recently, the market has gone off the boil, in fact, one could say it’s a waning market.  Sellers are bullish, but buyers are refusing to pay ridiculous prices.  Enough is enough is the sentiment!

While I can’t promise you a golden goose in any market, I’m going to share a few hot tips on getting the best price on a house.

I draw from my own experience in trawling the streets for nine months before buying a functional three bedroom, brick and tile unit with an internal access garage that Dad said ticked all the boxes.  With 0 character and all the practicality a pensioner would need, pink carpet with matching doorknobs was one of my many concessions.

My first advice to you is, take off those rose-tinted glasses. If you want a good deal, you’re not going to buy your dream home.  Keep your emotions in the closet.

Getting the best home deal can be whittled down to four essential strategies:

  1. Research, research and research that area

While ‘analysis paralysis’ is counter-productive, researching property is a different story…the more the better.  Choose an area where you want to live and a couple of suburbs outside of this.  Trawl those Trade Me and Real Estate listings.

Keep a spreadsheet and list every house you visit, recording basic information such as bedrooms, section size, location and CV.  When the place has sold, call the agent and ask for the sale price.  Do this religiously for three to six months.

Too many people say “It’s so tiring looking at houses, we just want to find one.” These aren’t the words that come out of a property poacher’s mouth.  Go hard or go home.  You want to be able to tell the agents what’s sold in the area for what price, not the other way around.

  1. Put in cheeky offers

Once you’re abreast of what’s been happening in the market, you’ll be a walking encyclopedia of house prices.  You want to know more than the average agent.  But information is power, so don’t go spouting off the price to everyone.  Pull it out at the right time, that is, when you put an offer in.  Set a figure, of say 10-15% less than what you think it’s worth.  Recite examples of properties, preferably ones that support your lighter price!.

Don’t show all your cards at once!  In an uncertain market, most aren’t sure  what they want to pay, so the sales process becomes a copy-cat game.  He/she thinks it’s worth that it must be.  So if I pay $20K more, I’ll get it.  No!  Go in with a low-ball offer.  Get in before the auction date, within the first week of open homes, while agents are ‘gathering feedback’.  Find out if there’s a motivation to sell.

  1. Give ‘em a deadline

Unfortunately, you won’t be able to make the auction, so your offer has to be presented early.  This will hopefully knock out a couple of the competition who are arranging finance or dithering over what it’s worth.

I repeat, never get emotionally involved.  You can like a property, love it in fact, but don’t let the feelings of owning it infiltrate your dreams. If you miss out on this one, there’ll be something even better.  Trust me!

  1. Work those agents, but keep your cards close to your chest

Agents are there to sell houses.  Sadly, as much as you think so and so is your new best friend, they really aren’t.  If you gad about, swaggering with cash and unconditional dollar signs, you may be flavour of the month.  But rather than them using you for their next commission cheque, a smart buyer will use them to their advantage.

Milking them for information about their latest listings, getting the first viewing opportunity, reminding them of their obligation to ‘present all offers’, these are hardly perfect conditions for people pleasing behaviour.

A word of advice.   If you want an agent to help you bag their new listing, make it friendly, be in their face, but keep your cards close to your chest. Knowledge is power and if no one knows your limit, there’s more room for negotiation.

Getting a home in the Auckland market can be achievable.  Around every street corner, there’s a motivated seller and there’s you, the educated, discerning buyer.  Armed with your own research, you are better equipped to know what represents good value and present your offer with confidence, remembering that firm deadline.  Not disclosing your final price to the agent is key to retaining power in the negotiation, as is remembering that you’re not in it to make friends.

Get out there and secure that pink carpet investment.  Armed with market knowledge and a wee bit of grit, that house that you’ve worked so hard for, the one the agents told you doesn’t exist for that price, will be yours!

High maintenance on a shoestring budget

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The first thing we tend to notice about people when we meet them, is their physical appearance. And unfortunately, it works both ways! While true beauty shines from the inside, looking well groomed helps us to feel good about ourselves and therefore, make a great first impression.

But let’s face it – there can be times in life when discretionary spending is limited. Here are my five tips to help you look your best, for less. From when you shop for clothes, to what products and services you choose and where you buy them, you can keep up appearances, without the price-tag.

Tip one: Shop off-season

Don’t pay full price for clothes. Why? Because they are a high volume, depreciating commodity. Buy clothes at the end of the season, not at the beginning. With a little patience, there’s a good chance that dress or suit will reduce in price.

You may unearth that classic gem in places like Dress mart Onehunga or other ‘seconds’ outlets. Better still, stock up in January when retailers are shedding surplus stock and ask family for gift vouchers for Christmas.
By shopping off-season, you are working in the opposite direction of retailers, who push their new season stock early, making you think you need to ‘stock up’ before the need arises. Through buying your summer clothes at the end of summer, your winter clothes at the end of winter, you are planning your next year’s wardrobe in advance. At 30-50% off the original price, shopping off-season makes a-lot of sense.

Tip two: Bring back the basics

Clever marketing drives us to purchase a product to provide an immediate ‘fix’. But it seems people aren’t paid as much to promote the benefits of natural products. You only need to look at the internet, Facebook and other social media to see how Advertising tries to change our perception of what we need. How did she look 10 years’ younger in just 14 days and fool her husband into thinking he had a younger woman? The secret ingredient is retinol or the latest, vitamin c mixed with hyaluronic acid. You look across and see the ‘promoted’ flag on the article. But still you click, hooked into the result. And there it is, paragraph after paragraph of evidence about this miracle cream, eyes glossing over the small print: ‘Individual results may vary’. Right at the end there’s a free trial! But hold it, there’s a catch. Before you enter your delivery address, there’s a prompt for credit card details. YES, they will bill you after the 30-day trial! And if you cancel, they may still have your phone number stored, so can stalk you.

I wonder if massaging in an organic oil and slapping on a light sunscreen to the face every-day, combined with fresh water and exercise, would hydrate, protect and re-generate skin cells as much as the high-end varieties? Get the basics right – don’t buy into the hype!

Tip three: Choose budget beauty services

Ladies, we can easily spend $200 a month at an upmarket salon, but what we’re really paying more for are higher rents, fluffy towels and luxurious surroundings. Drop-in places such as in malls and places referred to as ‘beauty parlour’, can offer a trimmed down service. Guys, you are generally better at this: just head to your local barber.
No, you are unlikely to enjoy soft music and lighting, in fact the room may smell of disinfectant (if you’re lucky), the table may squeak with cheap plastic and be covered in a purple, fraying towel. The staff are unlikely to treat you like Victoria or David Beckham, but they get the job done. No one will be the wiser. So, choose budget beauty services – don’t hang around for extra love.

Tip four: Pick pre-loved

As we all know, a great perfume or aftershave gives the final finesse to any outfit and becomes part of our personal ‘uniform’ or identity. If you go to Smith and Caugheys looking for an eau de parfume or eau de colonge, chances are you’ll be set back at least $120. Trawl Trade Me and I wouldn’t mind betting that sooner or later, someone will be selling the same item, perhaps with a few sprays less but in otherwise perfect condition. It’s the product you’re buying, not the packaging!

Tip five: Supermarket savvy!

After discovering that the savings are around $20 per week compared with shopping at other supermarkets, I’ve become a Pak n Save regular, at least for the staples. If this doesn’t spin your wheels, the receipt includes a fuel voucher for 4c off per litre and discount coupons on the back. I’m not suggesting that braving Pak n Save can help your appearance, but slashing money off one of your biggest weekly expenses is worth smiling about. Relating this back to appearances, accessories are harder to skimp on. To redeem yourself for any social embarrassment from clamouring about with 10,000 others and lugging your washing basket out of the boot to pack your toiletries, you could siphon those savings into an account for a touch of Prada or Hugo Boss.

So, there you have it. By shopping off-season, sticking to basic beauty products, choosing budget beauty services, picking pre-loved items and being Supermarket savvy, you could afford to create that great first impression, for less.

Beauty is only skin deep, and once you’ve got that first impression out of the way, you – and the other person – can focus on the one thing that truly matters – the person you are on the inside!

Getting home and hosed on your ACC

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The following article provides general ACC advice in relation to self-employment, tailored to Real Estate Agents.  It was written in July 2017 for REINZ magazine, on behalf of Matt Thomson, ACC and Insurance Savings specialist at Plus4 Insurance Solutions.

Reproduced here as a sample of my insurance writing, I recommend that you seek ACC and insurance advice specific to your personal situation.

As a Real Estate Agent, you typically encounter peaks and troughs in income.  If you had an accident, you don’t want ‘bad timing’ to whittle away your ACC entitlement.

If you’ve ever asked yourself the question, “What am I paying my ACC bill for?”, as a professional insurance agent with real estate clients, I aim to give you some straight-shooting answers.

This article focuses primarily on the income replacement aspect of ACC as it applies to ACC Cover Plus (the standard, default option for self-employed people).

Why pay ACC?

ACC provides you with medical treatment if you’re injured through an accident.  Where the injury causes you to be unable to work, ACC provides an income until you’re able (or deemed to be able) to work more than 10 hours per week.

How are your ACC levies calculated?

Your annual ACC levy is charged based on your previous year’s earnings.  When your income is submitted to IRD for the new financial year, your bill is re-assessed.  Similar to income tax, you’re billed provisionally based on your previous year’s earnings.

What should you prove to get paid?

If you lodge a claim, a Case Manager will check that you’re still working as a Real Estate agent. You’ll then need to do some running around to:

  • Prove your financials and financial loss
  • Gain agreement that your injury is due to accident and not degeneration (aging/an old injury).

Having met these requirements, you’re entitled to 80% of last year’s gross earnings, paid weekly, net of tax.

What are the ‘red flags’?

  •  First year on the job? Without financials to prove earnings, it’s difficult for ACC to pay
  • Dialled down your declared earnings? If your declared earnings are less than what you actually earn (e.g. due to financial expenses), your ACC payment will follow suit, paying 80% gross of declared rather than actual income
  • Not working before your injury? During the claim assessment process, your Case Manager may conclude that you haven’t actively worked as a Real Estate Agent in the four weeks prior to your injury. If this is the case, you may not get paid at all
  • Having a boomer sales period? If you’re doing substantially better in the year of your injury than in the previous year, your ACC compensation will be limited to last year’s income
  • It’s not a clear-cut accident? If ACC deems the severity of your injury to be based on degeneration, they don’t have to compensate you
  • Able to return to work in a limited capacity?  After an injury is signed off as able to withstand more than 10 hours’ work per week, this starts an abatement process where ACC will reduce compensation by the hours they assess as being fit for work.

How can you ‘get closure’ on your ACC?

In Real Estate, having a mutually agreeable contract is key and ACC can operate on this same basis.

To give you certainty, both on what you pay in levies and what you’re entitled to receive, the first thing to do is to get an agreed value ACC contract, i.e. ACC Cover Plus Extra.  For a similar or lower price to what you currently pay, an ACC Cover Plus Extra contract can:

  • Give you certainty on the amount you’d be paid on claim
  • Get your claim paid sooner. Because the sum is agreed, there’s no need to prove your financial loss or earnings at claim time
  • Let you focus on recovery. Agreed value contracts pay the agreed sum until 100% of the pre-accident hours are reached.

How can you get maximum income replacement?

Your biggest asset is you; your ability to earn.  Because the amount of accident cover is agreed, ACC Cover Plus Extra typically costs less than a standard ACC Cover Plus contract.

This can free up funds previously committed to accident-only cover, to covering you for illness as-well, giving you clarity on degenerative injuries.  This cover is available through Income Protection Insurance.

If you already have Income Protection Insurance and you’re paying under the default ACC (Cover Plus) option, you may be doubling up on your cover and paying much more than you need to.

Get a professional assessment

Most of us would never sell a house without consulting an agent that we deem to be an expert in the local market.

Similarly, many experienced insurance brokers charge nothing for their advice and may save you thousands. By receiving specialised advice to ensure that your ACC and personal insurance work together, you put yourself and your loved ones in a prime position to get back on your feet sooner.

 

Health or Trauma insurance…your best chance of recovery

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A sick child is no fun, but a sick Mum is even worse!  Our health is a top priority, but many of us have felt at the mercy of feeling ill, either through a simple flu or something more serious.

While many of us just badger on through the usual winter ailments, if we’re really sick, we quickly realise that we’ve got no choice but to surrender.

Our health and well-being is the cornerstone of life.  When it comes to insuring it, there are two pathways: Health insurance and/or Trauma insurance.

Health insurance is broadly a surgical/private hospital policy that pays on a reimbursement basis, up to policy limits.  Trauma insurance pays a lump sum upon diagnosis of some 48 medical conditions, requiring a survival period of at least 14 days.

Which insurance is superior and can you get by with just one?

First up, as nothing substitutes insurance advice that is both professional and personalised, I recommend that you discuss your age, budget, medical concerns/history and current financial health with a good broker (I’m happy to give recommendations) before a decision is made on what insurance cover is put in place for you.

Below are a few guiding principles to jump-start your decision-making process.

  1. Do you have existing savings?

Health insurance generally covers elective services that could be delayed in the public health system.  The public system waitlist guideline is generally 120 days for non-urgent treatment, however there are exceptions to this.  Early diagnosis and choice of specialist can be significant advantages to being proactive about your health, catching symptoms early and avoiding delays in treatment.

Health insurance reimburses the insured person (or policy owner) or in some cases, reimburses a recognised provider directly.  One of the great benefits of health insurance is the ability to receive surgical cover up to the actual cost of surgery (without a limit applied.  However, specific limits and Usual, Customary and Reasonable (UCR) charges may apply to other benefits such as specialists and tests, meaning that the the total cost of the treatment (including ancillary costs such as travel, accommodation, follow-up treatment and medical incidentals) may be above the amount covered by the policy.

If you don’t currently have a financial buffer in place in the way of savings and sick leave, strauma (and income) insurances are a wise safeguard.

  1. Do you have existing health concerns?

Both health and trauma insurance require health evidence and may exclude certain conditions.

Certain health insurance policies may cover pre-existing conditions after a specified time period, e.g. three years.  If you do have existing health concerns or history, the benefit of using an insurance adviser (over going direct yourself), is that a broker can deliver the best cover terms for you, ‘shopping’ the deal among a few insurers to determine the best acceptance terms for you.

  1. What are your existing financial commitments?

With a lump sum pay-out (and a portion paid for early stage cancers), the blessing of having Trauma insurance is that the money can be used for whatever you choose.  It can buy time (to recover), choice of treatment and cover ongoing rehabilitation and lifestyle changes of your choice.

In essence, you can spend trauma insurance however you like to alleviate financial pressure and help you recover.

On the downside, the policy is generally limited to set definitions for medical conditions.  You must reach the level of severity specified in the policy before a claim is paid, meanwhile, you may be unable to work.  This is where a tailored insurance recommendation consisting of income cover, trauma and/or health insurance and life insurance really comes into its own.