Insurance, at its essence, it is transferring your financial risk to a company and paying a regular premium to them for the pleasure.
No one likes to pay for insurance that is a give in. It provides peace of mind but feels like vinegar when each premium is deducted. Insurance is necessary, it ensures your home can be rebuilt, your car can be replaced, the car that you hit can be repaired, your tools can be replaced, your income can continue, the medication you need is funded – there are many products out there, this is where using a high-quality Financial Adviser can save you money and lots of time.
How do you identify a financial risk?
Personal
The typical risks which are insured are; House, Contents & Car, you touch and see these items every day, they can hold material and sentimental value which means you are more likely to insure them.
What you don’t see every day are the less obvious financial risks, such as the financial cost if you pass away. Understanding what the sudden impact means to you and your family’s way of life is vital to determine how much of that risk you want to transfer to an insurance company.
When you implement any insurance, having valid reasons behind the decision will ensure you have two comforts, firstly justification for the premiums you are paying and the knowledge to know that in the event of a claim you have the right money, going to the right hands at the right time.
Business
Owning a business is like driving at 100kph on the motorway and every 20m is a judder bar, you are not allowed to slow down – you must adapt on the fly and adjust, this usually involves having to make critical decisions quickly (sometimes on the way to work).
Identification of your business financial risks means, when it hits the fan, you have a much better idea of what is coming, how to adapt and plough on.
For example, a self-employed tradesperson, qualified, in their second year of business with no dependants or partner.The obvious risks that are typically covered are vehicle, tools, professional indemnity & liability cover. None of this exists without the human being able to do the work.
A tradesperson with a sore shoulder is not going to be a happy camper. An injury that they can work through is the less obvious risk to the one-man-band tradesperson, this will hamper their ability to complete the jobs that are being worked on while carrying an injury or illness. What they may not notice is the impact to the pace they can work at as well as the hours they can work continuously, this all combines to feed into their flow of their income and their mood.
They need to be seen by a specialist and put on a recovery plan so they can return to pre-injury workload and therefore pre-injury income levels. Health insurance, ACC and the public system are all here to help.
What you can do for free to help get you through a short-term injury
- As a business do you have contacts (Locum) who can help you complete a job if you are unable to?
- Have you discussed this with them already?
- Can your Locum assist you within a week?
- Can your Locum assist you within a week?
If you have answered ‘no’ to any of those questions, we should have a chat about transferring some of your risk to fund a short-term injury.
Your business is to provide a service to your customer, to complete the job in a timely manner. This is vital to your business performance. This is a risk you have as a business owner. There are insurance products that provide you with funds to assist you with a short-term injury or illness.
Did you know?
As a family, you decide that you only want to ensure that the home is debt-free should you pass away before it is paid off. If the mortgage is $500,000 you need $500,000 of Life insurance. But if you have $100,000 in KiwiSaver (KiwiSaver pays to your Estate should you pass away) do you need the full $500,000 of Life insurance?
Do you want to reduce the insurance you pay for and use your KiwiSaver as self-insurance?
Do you have the time to identify your risks?
A quality Insurance Adviser who will spend the time and energy to identify the risks you face on a personal and at a business level. Present this to you in a readable format. Then continue to work with you as your debt decreases, your business improves and as you age. It is very important to ensure the risk you are transferring to an insurance company is only the risk you need to as it costs you money to do so.
Having an attentive Insurance Adviser who also assists with breaking the back of any claim, stays in touch with you and the provider to make sure everything is being done that can be done, means your time can be spent focusing on your recovery or ensuring the business remains a going concern.
The article is written by:
Jonathan Whorwood
Financial Adviser
The Insurance Supply Co Limited