OPINION: Do you have a solid financial plan in place to create, protect and grow your wealth? What if something unexpected occurred? What would happen to you and your family? If you’re even a bit unsure, then please read on.
Welcome to RIVAL Wealth’s third series examining the nine fundamental steps we believe you need to take to achieve financial health.
So join me and our three new fictitious case studies each fortnight and get yourself sorted.
Step six: Health cover
Renee Renee is determined to own her own house within the next two years. To achieve her goal, she’s had to significantly tighten and prioritise her spending. When weighing up the options of what to insure, Renee has decided that she can’t afford private health insurance now. She’s weighed up the risk factors, but still feels uneasy about her decision. Her dilemma is what if she develops any illness between now and getting health insurance, as this will be classed as a pre-existing condition by a future insurer. Renee needs to accept that any potential illness – that could be life threatening will not be covered until she has health insurance in place, and this is not sitting well. Renee’s father has health insurance, so when he was hospitalised recently, he was able to access very expensive non-Pharmac drugs, currently unavailable through the public system. Because his severe medical condition is covered by health insurance, the continued costs his health insurer will pay for, far outweigh the premiums he will pay. He has decided he will never cancel his health cover due to the recent benefits. This meant he recovered faster because he had the best treatment available. So, Renee wants to get health insurance very soon when money isn’t as tight to cover any future pre-existing conditions.
Top tip: You can reduce health insurance premiums by choosing the options that best suit your situation.
Warren and Judith
Warren and Judith both receive free medical insurance through their employers. Warren is covered for medical and dental care while he is employed for the NZ Army. Christine has had full medical cover, including pre-existing conditions since she started working for a major bank 25 years ago. This cover has proved invaluable, as both Warren and Judith have made several high value claims over the years. Warren’s had both his hips replaced and Judith has received various treatments for a heart condition and varicose veins. For the last six months, Judith, a keen runner has been experiencing hip pain. According to her specialist, she too will need a hip replacement within the next four-to-six years, and has been instructed to give up running. Although she can go on the public hospital waiting list, she’s very relieved to have private medical cover, because it will give her more control over the timing of her surgery. When Judith retires from the bank, she will have the option to continue her existing medical cover. Her policy will no longer be fully funded, but all her existing ailments will still be covered, and she could choose to reduce her premiums by having a higher excess.
Top tip: Join group schemes whenever possible and take advantage of group rates. Often premiums are lower and sometimes pre-existing conditions will be covered.
Darryl and Christine
Darryl is fundamental to their restaurant’s success and they are therefore hyper-aware of what could happen if he was in an accident or struck down by illness.
While a natural advocate of the public health system, nurse Christine is also privy to the enormous pressures it can come under. Every day she sees the benefits that private health insurance can provide.
Recently Darryl’s younger brother had a growth removed from his abdomen and was very concerned he might have cancer. Luckily the biopsy revealed it was benign and needs no further treatment. Now the whole extended family are considering health insurance. Christine realised how motivating it can be when someone close to you gets sick.
Darryl and Christine are looking good financially so have decided to add their children to their existing health policies – an additional outlay of about $5 per week. The advantage for their children will be that future medical conditions are covered. In other words, when the kids become adults, they can continue their cover and not have to worry about re-applying for insurance which would not cover any pre-existing conditions they developed in their childhood.
Top tip: Self-insuring might seem like a good option until you discover common surgeries like hip replacements can cost over $25,000. Make sure you weigh up your personal risks.
* Direct questions to Tim Fairbrother www.rivalwealth.co.nz 0800 4 RIVAL (0800 474 825)
This information is of a general nature and is the opinion of this authorised financial adviser. This is not intended to be personalised financial advice. A disclosure statement is available on request and free of charge.