How can I reduce my Insurance overheads, without sacrificing my cover?

You may be considering whether or not to keep the same level of Insurance cover (such as Life, Trauma, Income Protection or Private Medical), particularly if you’re trying to reduce your expenses during these challenging times.

Firstly, please seriously consider the importance of your cover. The reason you took out Insurance cover was to financially protect you, your family, and your business when times get tough. It is important that we don’t lose sight of its purpose during times like this.

As far as we are aware, across all New Zealand Insurance providers there are no exclusions for Covid-19 on existing policies – So if you become seriously ill, a claim can be considered just like any other, if you meet the criteria.

In terms of the expenses you’re considering cutting, Personal and Business Insurance should be towards the bottom of the list.

In saying all that, we understand you still need to put food on the table. So, if you need to take this route, there is good news. Some Insurers have put together ‘relief packages’ to help clients keep their cover during this period of uncertainty.

Some providers are offering ‘Premium Holidays’ – which means you don’t have to pay your premiums for a certain time period such as 2 months, but you’ll still be fully covered and able to make claims. This option is mainly for those who can prove severe Financial Hardship – Such as redundancy, or a significant drop in income due to Covid-19. There aren’t any strings attached here, think of it as a gesture of goodwill from the Insurance company.

The other option Insurers are offering is a ‘Premium Suspension’ – this means you put premium payments on hold for a certain time, for example the rest of 2020, but you have no Insurance cover during this period, and cannot make claims.

Your first thought regarding a Premium Suspension might be along the lines of ‘why bother, I’ll just cancel my Insurance and re-instate it when I’m in a better financial position’ – this notion is fair enough, however not advised. To cancel your cover altogether, means any future Insurance you were looking to take out would be subject to underwriting. This means, for example, that any health issues you’ve had since you first took out your policy may mean increased premiums, or even difficulty getting cover at all.

While a Premium Suspension isn’t as good as a Premium Holiday, and carries significant risk due to the fact you’re not covered, it is better than cancelling your cover altogether – and can be considered a short-term solution to free up some cashflow if absolutely required.

Please note, some providers may not alert you when your suspension period is coming to an end, so if you don’t contact them to reinstate the cover, it could be cancelled. If this is the case, set a calendar reminder so you don’t forget.

All Insurance companies will allow you to miss up to 3 premium payments before cancelling your cover (meaning you are technically covered for 3 months without paying). However, at the end of this time period, you will have to pay back the arrears, or risk having your policy lapse. Most providers will offer a ‘payment plan’, to help you pay off the arrears bit by bit.

There are some other alternatives as well if you can’t get a Premium Holiday but wish to reduce the cost of your Insurance. For example, you can look at altering your benefits, or increasing excesses on your Medical Insurance.

In the first instance, we strongly recommend talking to your financial adviser about which Insurance company you are with, what they are offering by way of relief, and what other options are available to you.

If you know which Insurer you are with, head to their website and look for information they’ve released regarding Covid-19.

If you don’t have an adviser, or don’t have a relationship with them, we are happy for you to contact Solutions Financial Services, and one of our team will aim to help you as best as we can.

If you have friends or family who need help, we are more than happy to have a look at their policy and provide guidance.

Send an email to - [email protected] and we will come back to you as soon as possible.

Take care and stay safe,

Jess