Sourced from Stuff.co.nz
Insurers are offering policy suspension and premium “holidays” to families and business-owners struggling financially due to the coronavirus lockdown.
The offers are a bid to keep customers for the long-term, but is also following the example of the Government and banks, which rushed out emergency loans for businesses, and mortgage holidays for homeowners.
Families and business-owners plunged into financial uncertainty are looking at cutting back their insurance cover.
“We are having this conversation daily with clients,” said Cecilia Farrow from insurance advisory company Triplejump.
Triplejump is working with clients to help them hold on to as much cover as they need now, and will be needed after the crisis has ended.
“Consumers need to evaluate their options around premium holidays rather than cancelling their policies at this point in time,” Farrow said.
“In six to nine months life comes back to some sense of normality,” she said.
People doing it hard now are being offered options by both life and general insurers that range from suspending policies too taking premium “holidays”, after which missed premiums need to be paid back.
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But policy suspensions and premium holidays could vary from policy to policy.
An AIA policyholder suspending their life insurance, for example, would not have cover for the period it was suspended.
Partners Life had introduced a Covid-19 trigger that lets policyholders take a premium holiday, if their incomes dropped by 20 per cent as a result of the coronavirus outbreak.
Even when on premium holiday, Partners Life policyholders qualifying under the Covid-19 trigger would keep their cover in place.
“We will put them on a premium holiday for six months with full cover, no premiums, which is literally giving them free cover for six months,” Partners Life managing director Naomi Ballantyne said.
Premium holidays at AIA, which could be up to six months, left cover in place, but the policyholder was required to pay the missed premiums at the end of that period, or arrange a payment plan with the insurer.
If people cancelled life insurance, trauma, and critical illness policies now, when they came to take new ones out, they would face exclusions, Farrow said.
These would be for their own pre-existing conditions, which might have developed after they took their original policy out, but they could also find Covid-19 and pandemic exclusions in the new policies they take out, she said.
“I would expect that new policy wordings may include exclusions for pandemics related to Covid-19,” she said.
Currently, virtually no policies in New Zealand had pandemic exclusions, Farrow said.
Whether to cancel, suspend or take a premium holiday was dependent on each policyholders’ personal circumstances, Farrow said.MORE FROM
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People should seek insurance advice, and advisers had all switched to working remotely, and were available, she said.
Industry body Financial Advice NZ has created a clearing house of advisers to answer people’s queries, which could be found on its website.
Options for cutting premium costs on some policies included asking insurers to strip out some cover, such as breakdown cover on car insurance, or lifting excesses on home and contents cover.
It was also tempting for people to cut some forms of insurance entirely, such as contents insurance which could save $1000 a year, but some policies people had no option but to keep.
Chartered insurance broker Andy Jensen said this included house insurance, which was required by mortgage lenders to be in place, and which if cancelled would put them into immediate default on their home loans.
But policyholders often overlooked the full scope of their cover, and needed to realise that saving money by switching, for example, from comprehensive car insurance to third party cover would leave the policyholder without cover for things they may not realise, Jensen said.
That included personal liability cover under their contents insurance.
Tower chief executive, Richard Harding, said: “We know people might think about cancelling their insurance, but it is important to maintain cover because even a small accident can end up costing thousands.”
“Winter is also just around the corner which means storms and wet weather are on the way and living in New Zealand means we’re always at risk of earthquake, which is why insurance remains so important for people.”
The company had created dedicated teams to help customers restructure their insurance to make it more affordable if they need, including doing things like removing added benefits such as roadside assist and increasing excess payments, Harding said.
“We also have payment deferral options for up to three months for people facing genuine hardship or where vulnerable people are at risk,” he said.
Christopher Walsh from online research company Moneyhub said insurance was one area where households could make large savings.