HARNESS FINANCIAL NEW ZEALAND
Frequently Asked Questions
Spend With Freedom | Invest Wisely | Retire Well
Simply click on the sections below to view each FAQ category, and click on the headings in each category to expand out further subject information.
Use our remote controls below to navigate sections
Insurance to protect against disability.
Insurance to protect against untimely death.
Insurance to protect against serious illness.
Your income is your biggest asset!
Total & Permanent Disability Insurance.
Insurance to protect against disability.
As with all disability insurance products or benefits, the most critical aspect of TPD insurance policies is the definition of disability – what it means to be disabled (and qualify for a benefit).
What it means to be totally and permanently disabled will be defined in the policy wording and may range from the inability to do your ‘own occupation’ (the most generous definition) to the ‘inability to perform activities of daily living’ (not generous and covers very serious disability only). Carefully checking the definition of disability in the policy wording and understanding its implications is essential and a tricky area we can help guide you through.
In New Zealand, most TPD products offer two options when it comes to the definition of disability – ‘Own Occupation’ and ’Any Occupation’. Own occupation is more generous and therefore costs a bit more than ‘Any Occupation’.
TPD is insurance that pays benefits if you are totally and permanently disabled. It does not pay benefits if you are partially disabled or temporarily disabled, which is why most people also need temporary disability insurance - to ensure their disability insurance protects them against a broad range of disability scenarios.
Most TPD products pay claim benefits in one lump-sum and then cover ends, so making sure you have sufficient TPD cover from day one is essential. Incidentally, some temporary disability products might pay additional benefits if you are TPD, but these are often not sufficient to remove the need for some TPD insurance in addition.
Temporary disability policies like income protection limit the amount you can insure (usually no more than 75% of income). This leaves a portion of income not replaced by temporary disability products if you are disabled. While this might not be a problem if your disability only lasts a few months, it is likely to be a problem if you can never work again. Some disabilities come with very big expenses, which even replacement of 100% of your income would not cover. For these reasons, generally, both TPD and suitable temporary disability insurance is needed – the two product types work together to provide the sufficient insurance benefit needed if you are totally and permanently disabled.
If your trauma cover includes TPD benefits, we must check how your trauma policy defines ‘total and permanent disability’ and how much it will pay. If the definition is ‘Own Occupation’ and the full sum insured is paid, that is good, and you might need less TPD insurance as a result. Even so however, most people don’t have enough trauma insurance to properly protect them against the very large financial consequences of total and permanent disability. TPD insurance is often significantly less costly than trauma insurance, so taking TPD cover is cost efficient and makes the large benefits needed more affordable.
Government assistance to disabled people is relatively modest and may not even be available if income or asset tested. Any Government assistance you do receive is unlikely to allow the lifestyle and opportunities your income could have made possible. ACC can pay reasonable benefits, but it only covers disability caused by accidents: disability caused by illness is not covered by ACC and a lot of permanent disability is caused by illness!
(depending on your occupation this option might not be available)
‘Own occupation’ definitions usually mean (but may not – as usual we must always check the actual policy wording), you are totally unable to perform:
- Your pre-disability occupation – your ‘own’ occupation; and
- You are unlikely ever to return to your ‘own’ occupation.
In New Zealand, ‘any occupation’ definitions do not usually mean ‘any occupation whatsoever’ (but again, we should always check the policy wording).
‘Any occupation’ definitions usually mean you are totally unable to perform:
- Your own pre-disability occupation or any other occupation for which you are suited by way of your training, education or experience; and
- You are unlikely ever to return to your ‘own’ or such other ‘any’ occupation.
TPD in products in New Zealand typically pay the amount of insurance you have selected – called the sum insured - in one lump-sum. You don’t have to prove any loss or expenses and can use the money paid to you in any way you choose. For example, you could…
- Settle your mortgage.
Repay other debts or financial obligations. - Buy specialised equipment needed to make your life easier or give you mobility.
- Pay for home modifications such as wheelchair access up stairs, lower kitchen tops, widen doors and make bathroom renovations to allow wheelchair access.
- Pay for a caregiver or additional help required to look after children or keep the home and garden.
- Pay for rehabilitation services.
Pay daily household and family expenses, education expenses for your children. - Replace your partner or spouses’ income if they choose to stop working to take care of you.
Enough insurance of the right types can take away the financial distress that come with never being able to work again.
TPD insurance does not typically pay benefits if you:
- die;
- suffer a serious medical condition which does not leave you totally and permanently disabled; or
- need private medical treatment.
To cover these risks you will still need other insurance products. Most people need multiple insurance products to properly cover all the risks they face.
TPD policies might come with some additional ancillary benefits and exclusions (when benefits won’t be paid). We can guide you through the options to ensure you select the right policy for your individual circumstances.
Life Insurance
Insurance to protect against untimely death.
It’s very sad when a loved one passes away. Sometimes people pass away before they reach old age, before they stop working and possibly while they have young families. In cases like these, death can also cause very significant financial harm.
Aside from the direct expenses that come up when someone dies, like funeral expenses, very often the family forever loses all the future income that the deceased would have contributed to their family. Losing a mum or dad is terrible, but how will they pay the mortgage? Will they lose their home too?
While insurance can’t protect you against death, it can protect your family against the financial consequences of death and ensure they can stay in their home and pay the bills.
There are many ways that the death of someone can cause financial loss. In particular, families will forever lose the future income of a working or will-be-working-in-the-future, family member. In addition, there will be funeral and possibly other expenses to deal with. Incidentally, even a modest income of $80,000 PA is worth $2,4 million dollars over 30 years to a 35-year-old who passes away (assuming a retirement at age 65) and this is not allowing for any future income increases!
A surprising number of people die early and during their working lives. In 2022 just shy of 6,600 people between the ages of 20 and 65 died in New Zealand. That’s slightly more than one in every six deaths!
Life Insurance is insurance that pays money if you die. It does not pay benefits if you are disabled or suffer a serious illness, which is why most people also need disability insurance, trauma insurance and medical insurance, for example.
Life insurance products typically pay claim benefits in one lump-sum but there are life insurance products available that pay regular monthly amounts when you die (for the period of time you select – up to 30 years!). Combining a lump-sum amount with a regular monthly payment can help your family manage their finances over the longer term, thereby ensuring their financial security.
These ‘accidental death’ policies are significantly cheaper than life insurance products that pay also for death by illness. The cheap premium can seem appealing, but, by far the most deaths are caused by illness not accident (this is why accidental death policies are much cheaper). Accidental death policies on their own are unlikely to protect your family adequately – accidental death insurance is like car insurance that only pays if you have collisions with red cars!
It may be very hard for your family to scrape by on one parent’s income: will your children have to give up their schooling early to work? Even if one parent’s income is enough to pay ongoing household expenses, losing your income will deny them the lifestyle and opportunities your income could have made possible.
Do they need life insurance?
This is something we can help investigate- there are several things to consider. One thing to remember is how valuable stay-at-home parents are. Could you realistically work and take care of small children? How much money might be required to have a caregiver look after your children – possibly for many years.
If you think about it, insurance is really ‘Give-a-Little with certainty’. The certaintyCertainty that your family will get as much as they need if you give a little in advance (pay the premium).
The power to…
- Pay off the mortgage and have a mortgage free home
- Settle debts, like business or car loans, or pay for other financial obligations, like, finishing a house build
- Pay children’s expenses such as college or university expenses
- Help with living expenses such as school fees, food, electricity and water, council rates, medical insurance, house, car and contents insurance, and other family expenses
- Pay for final expenses such as funeral costs
- Pay for your partner or spouse to take time out from work to grieve or take a trip
- Provide a necessary booster for retirement funding for your partner or spouse. Losing your income may make it very hard for your spouse or partner to save enough for a dignified retirement
Life insurance gives your family financial security when you are gone and gives you peace of mind while you are alive.
Trauma Insurance.
Insurance to protect against serious illness.
Trauma insurance (sometimes also called Critical Illness insurance).
Unfortunately, all of us can suffer a serious illness or severe injury. Did you know that every day 74 New Zealanders are diagnosed for the first time with a serious cancer! Aside from the medical consequences and treatment costs, suffering a serious medical condition, like cancer, heart attacks and loss of sight, for example, can have very significant financial costs.
While insurance can’t protect you against the medical consequences of suffering a serious medical condition, it can help protect you and your family against the financial consequences that come with serious illness or injury. We are fortunate in New Zealand to have access to some of the best trauma insurance products in the World.
You can choose what amount of trauma insurance to take. Most Trauma products pay lump-sum benefits if you suffer one of the defined conditions. If you suffer the same condition more than once (say you have two heart attacks), you are likely to get paid the full sum-insured once only. Making sure you have sufficient trauma cover from day one is essential.
In some cases, trauma products may pay a portion of the sum insured (the amount you insure for) early, for a range of ‘lesser serious’ conditions, leaving the balance available in case you suffer a more serious condition.
Trauma insurance is especially important for people who don’t work. If you don’t work, you may not have disability insurance that will pay benefits. Trauma insurance pays benefits if you suffer one of the defined conditions, it does not matter if you are disabled or not. The consequences of suffering a serious illness or injury are not limited to the loss of an income.
Enough insurance of the right types can take away the financial distress that comes with suffering a serious medical condition.
Charity might help, but there is no certainty you will get anywhere near enough money to deal with the ongoing costs a serious medical condition might cause.
If you think about it, insurance is really ‘Give-a-Little with certainty’. Certainty that your family will get as much as they need if you give a little in advance (pay the premium).
Income Protection.
Your income is your biggest asset!
Ask most people and they will say their house is their biggest asset. In fact, your income-earning ability is probably a much bigger asset than your house, particularly if you are still some years from retirement. Most people don’t think twice about insuring their house, but relatively few people insure their income – does that make sense?
The inability to work due to sickness or accident can mean interruption to your income flow or even the total loss of all future income. Incidentally, even a modest income of $80,000 PA is worth $2,4 million dollars over 30 years to a 35-year-old who can never work again (assuming a retirement at age 65) and this is not allowing for any future income increases!
Income Protection (sometimes called Income Cover or even Mortgage Repayment insurance) is insurance that pays monthly benefits for each month that you are disabled. Income Protection does not usually pay monthly disability benefits if you die, need medical treatment or simply because you suffer a serious illness or accident. You must be unable to work due to sickness or injury to qualify for income protection disability benefits.
While some income protection policies might pay additional benefits if you die or suffer a defined injury or serious illness, these additional benefits are usually modest and don’t replace the need for life insurance, trauma insurance or medical insurance.
No – you can take less. If you take less than the maximum allowed, you will likely be ‘underinsured’. If you are underinsured...
- your claim payment may not be sufficient to protect your family adequately; and
- what will your family be forced to go without?
Living with a disability can be very stressful – for the whole family: how much worse will this be with unnecessary added financial stress? The physical disability of one person is terrible, but the financial disability of the whole family as a result is unnecessary.
Some people believe there is something called ‘self-insurance’. We think this is better described as ‘self-risk taking’ which is really only sensible for risks with very small financial consequences.
Income protection policies usually have a minimum ‘waiting period’. This is the period you must remain disabled before qualifying for disability benefits. The usual minimum waiting period is 4 weeks, although you can choose a longer waiting period. Longer waiting periods mean you may have to fund a longer initial period of disability yourself, but longer waiting periods often come with significantly lower premiums.
In many cases, income protection products pay disability benefits in advance. Some products, however, may pay benefits in arrears, which means that, even with a 4-week waiting period, you will likely have to wait at least 8 weeks before a disability benefit reaches your bank account.
Monthly income protection benefits continue until the earlier of:
- You no longer being disabled (you can go back to work) even if you choose not to go back to work; or
- Your policy payment term ends; or
- You pass away.
The payment term is the maximum period for which monthly disability benefits will be paid if you are disabled. You can usually choose the payment term that best suits your needs, ranging from as short as one year, to many decades with ‘to-age-65’ or ‘to-age-70’ payment terms.
Premiums are lower for shorter payment terms and so these can seem appealing, but how would you feel if you were permanently disabled, never able to work again, and your income protection benefits stop after a year or two. Unless you are very close to retirement, how will you and your family cope without continued income replacement?
Health Insurance.
Health care in New Zealand and why health insurance is important.
There are a few important players in the New Zealand health system:
Te Whatu Ora:
Health care in New Zealand is provided by the taxpayer funded public health system – Te Whatu Ora. If you need medical treatment the public health system will treat you and most people are not required to pay for it (some people in New Zealand on short term visas may not have access to public health services without cost).
Private Health Care:
You can also get medical treatment privately, but you will have to pay for it. Emergency care is usually not provided privately. Acute or emergency medical treatment is provided by public hospitals.
Medsafe:
Is the Government department that approves medicines and treatments for use in New Zealand.
PHARMAC: Is the Government medicines funding agency. PHARMAC decides which medicines and treatments will be publicly funded and for which medical conditions. Recommended treatment which is not funded by PHARMAC must usually be paid for privately.
New Zealand’s public health system is quite good by international standards, but being taxpayer funded, it has limitations. This means:
- Certain treatments and medicines may not be available publicly at all; or
- You may need treatment but not qualify for treatment under public health protocols; or
- PHARMAC may not fund the treatment recommended to you; and
- Waiting times for treatment can be long and often unacceptably long, caused by limited resources and high demand;
We all want the best treatment for ourselves and our families as soon as possible. Delays in treatment, particularly in diagnosing illness, can make a bad illness much worse.
Aside from not always getting medical treatment when you need or want it, the public health system usually does not give you any control over who treats you or where your treatment will take place.
Health insurance pays the costs of private medical insurance, which gives ordinary people the ability to fund the sometimes very costly medical treatment they need, privately. Private medical treatment gives you control over who treats you, where they treat you and, usually, when they will treat you.
Some people may think health insurance is unjust and allows people to unfairly ‘jump-the-queue’, but we don’t see it that way at all. In reality there are two different queues, one public and one private. People in the private medical ‘queue’ are not jumping the public ‘queue’. They are in fact freeing up spaces in the public ‘queue’. This allows people without medical insurance to join a queue with far fewer people, making it possible for them to get their treatment in the public health system sooner.
An excess (sometimes called a ‘co-payment’) is the amount you must pay before the health insurer will pay anything. If your excess is greater than your treatment costs, there may be nothing more for your health insurance to pay.
Often you can choose the excess applicable to you. Selecting a higher excess will lower your premiums.
An excess is a good tool, because it allows you to take the risk for minor medical treatments yourself and save on premium cost.
Unlike life or trauma insurance, where you select the sum you want to insure, there is no ‘sum insured’ to make a decision on. Health insurance benefits payable are usually limited to a maximum amount payable in any one year. These limits usually apply to all policyholders who have that policy/benefit – everyone gets the same ‘maximum’ benefit available. Different limits may apply to different benefits.
The big benefit of health insurance is that even if you use all the available benefit in one year – your claims reach the limit for that year (which is not likely), next year your limit will ‘refresh’ and the full benefit will be available again. This is just as well, because some unfortunate people will need medical treatment worth millions of dollars over their lifetimes.