Insurance advice

Many women see income, health and home insurance as a bit of a gamble, but if you’re not covered, you could be risking your family’s security and future happiness.

“If you get cancer or any other condition covered by the policy, you’ll be able to afford to... go to the US for treatment, or simply use the money to ensure your remaining time is good.”

Insuring yourself, your income, your health or your home against disaster may be akin to playing the lottery, but most people prefer to take a ticket than leave it to chance. However, when it comes to life and income insurance, many women are under-insured. A 2005 study by the Investment and Financial Services Association (IFSA) showed that only 20 per cent of full-time working mothers have enough insurance to cover their income for three years or more (the standard amount is 10 times the annual salary) and 48 per cent of full-time working women believe life insurance is too expensive.

But what is the real cost of not having insurance? Take a look at these personal stories and consider seeking advice – it could save you more than money.

Insuring your income
In the early 1990s, public relations consultant Toni Lennard (pictured overleaf) worked for a big firm and their client, insurance giant MLC. Toni was so impressed by MLC’s policies, she took out income protection and life insurance. Little did she know that she would need it.

Fast  forward to 2005: Toni is the single mother of a teenager and a self-employed consultant who works from home. She had to undergo a major operation and, while everything went according to plan, Toni was out of action for a couple of months.

“The income protection policy I’d taken out said a claim would pay 75 per cent of my income on an indexed basis. I had to wait four weeks for the payments to kick in – I’d chosen that option when I took out the policy because I was an employee at the time and I assumed my employer would fund four weeks of paid leave.

“The claims experience was very positive. My doctor and I filled in the forms and sent them off. Neither of us knew how long I’d be off work, which meant I didn’t really know how long I’d be covered for. As it turned out, I was able to go back to work after eight weeks and the other nice surprise was that, since I hadn’t made a claim before, I was given a bonus payment – 25 per cent more.”

Toni says the thing to remember is that if you claim a tax deduction on your income protection insurance premiums, then you have to declare any payouts in your tax return and you may incur a tax bill.

“I also have term life [death cover] and critical illness insurance through MLC, but I’ve never made a claim before. Critical illness insurance is pretty expensive, but if I have to claim, I won’t have to worry about school costs or my mortgage ever again. If I picked my parents on genetics, then like many people, I’ve made a bad decision, so I do have some concerns about my future. Of course, the life insurance company takes those factors into consideration when calculating a premium.

“My best friend died of cancer before she turned forty. She had life insurance, which helped her husband and child after she was gone, but she really needed the money when she was diagnosed – that’s the benefit of trauma/critical illness cover.

“To me, the lump sum means choice. If you get cancer or any other condition covered by the policy, you’ll be able to afford to stop working, go to the US for treatment, or simply use the money to ensure your remaining time is good.

“My father died of cancer ten years ago and he felt he had to keep working almost right up until he died to pay off his debts. He couldn’t sit back and relax, and that’s not right.

“Money won’t make you healthy, but it can make a difference if you’re looking for the best treatment. The cost of some experimental drugs isn’t covered by the Pharmaceutical Benefits Scheme and you hear about people mortgaging their houses to pay for treatment. Plus, I’m a single mother with a fourteen year old, so if something happens to me, it’s a long time before my daughter can earn an income. I have a mortgage and who would pay for that? You can’t rely on someone else to pay.”

Lynne Rodda, Australian editor of Lois Frankel’s Nice Girls Don’t Get Rich (Warner Books, 2005) and senior financial planner at Outlook Financial Solutions, says Toni is one of the savvy ones – most people don’t have income protection insurance, and there are definitely more women than men in this category.

“When people look at their super statements, often they just see numbers and don’t understand what it represents. The little bit down the bottom about their total income and disability cover may be overlooked. I usually get them to dig out the statements so I can explain what level of cover they have,” says Lynne.

“Often women with partners think they’ll be alright. They rely on the fact their spouse will be there for them or they overestimate how much income their partner can produce. Both these assumptions ignore reality. The other day a man told me his wife didn’t need insurance because she’s at home and not working. But who would look after the kids if she was out of action? How would they pay for that?

“People also need to realise that if one salary was not coming in due to ill health, they’d be in trouble.”

According to Lynne, most people tend to insure for the minimum and that may not be adequate – income protection only covers 75 per cent of your income, so there’s still a gap.

Lynne had her own experience of being uninsured when she was a single mother in her thirties. She became ill and couldn’t work for a while. Her company fund didn’t cover her and, as there was less emphasis on women providing for themselves, she had no separate insurance. So she “lived on soup” for a couple of years.

Lynne says insurance premiums tend to be against women, particularly as they get older. Women who are in their forties or older may also find they’re disqualified by the underwriters because of family health history.

“At the end of the day, how many women care enough about their income to insure it?” asks Lynne. “How many are prepared to pay the cost of insurance? And how many truly understand and accept the risk of not having insurance?”

Lynne says it all stems from how the woman’s income is perceived within the family – as a frill or a necessity – and that may determine its insurance status.

Wealth and health
Dr Penny Burns, a Sydney GP, believes in Medicare, but says she was never in doubt about funding her family’s health through private insurance because she believes in giving back to the public system. “It depends how you prioritise health and whether you choose a private practitioner. I’ve noticed premium increases over the years, but that doesn’t bother me,” she says.

“I feel that health and education are so under-funded and we do expect a lot for nothing. My sister is a vet and says people complain about how much they pay to get treatment for their animals, because it’s not subsidised by the government. Sometimes people notice their own medications are the same as the ones animals are prescribed except cheaper, so they may be tempted to use them on their pets to save money.

“We originally got private insurance for obstetrics, so I could pick the doctor,” says Penny. The Burns family has cover through the country’s largest insurance group, Medibank Private. Their policy is HealthyPlus Hospital and HealthyPlus Extras and, with a government subsidy of $619.40, costs them $1,446.45 per year.

Penny says the value comes in the ancillary benefits, especially for her three teenage children. “We’re a healthy family, but there’s been a few soccer injuries. It’s the unexpected things like accidents and avoiding long waiting lists for elective procedures.

“I know some people who go private initially, then revert to public treatment. I also know that the person who had the private cover will get the bill at the end.”

Cathy Charnley is one such person – she recently withdrew from her fund after finding out she was pregnant. “We’d had Brody [her three-year-old son] under private cover, but because I’m in the high-risk category, I have a specialist gyno and he only practises in the public system. That was the major reason, but we were also finding the premiums hugely expensive.”

One in four Australians will experience the need for some hospital procedure each year, but mother-of-two Anna Kramer-Higgins says that for her family, dental costs are probably the biggest consideration. She has private cover through her husband’s employer policy and the extras are useful.

“However, some things I’ve wanted to claim haven’t been available under private cover, such as a dermatologist consultation for one of the children,” Anna says. “Sometimes it’s not clear what we get, so it stops me using the policy fully because there’s still a gap to cover.”

But there are some financial incentives to go private. As Mary Marino, marketing manager of Manchester Unity points out, singles who earn over $50,000 a year, and couples and families earning $100,000 or more without private cover are required to pay a surcharge of one per cent in addition to the Medicare levy. “In some cases that’s close to the cost of having a health insurance policy without the benefits of hospital and extras cover,” says Mary.    

Prime coverage

Make the most of your private health cover with these tips.

• Keep your premium payments up to date – if you get two months or more behind, the fund can cancel your policy and refuse to pay any benefits.

Hospital cover

• Let your fund know you’ll be going to hospital: make sure you’re covered for the hospital bill and any doctor’s bills, and find out how much you’ll have to pay yourself.
• Make sure your fund has an agreement with the hospital you plan to use.
• Find out which doctors will be treating you, how much they charge and if they’ll use your fund’s gap-cover scheme.
• If you go to a public hospital, ask your fund if you’ll be covered before you agree to be treated as a private patient.

Extras services

• Consider using your fund’s dental and eye-care centres or preferred providers of ancillary services as this can save you quite a bit of money.
• Use providers that automatically claim the benefits from your fund or keep your receipts and make any claims promptly.
• Most funds have an annual limit on claims. Keep track of your claims, so you can make the most of these benefits. It may also be possible to schedule treatment for the following year, so your fund pays for it.

New additions

• If you’re planning to have a baby as a private patient, find out when you need to upgrade to family cover. If your baby requires treatment at the birth, he or she may need cover.

Health problems

If you have a complaint about your cover, contact the Private Health Insurance Ombudsman on 1800 640 695. There is also a lot of useful information on the Ombudsman’s website, visit www.phio.org.au.

 

Insuring your home

Tamara Martin, 28, takes buyers through up to seven houses a week as part of her job as a real estate agent on Sydney’s Northern Beaches. Tamara lives with her partner in a ground-floor apartment, but hadn’t thought to take out home contents insurance until an unwanted guest recently paid a visit.

A break and enter left Tamara and her partner in shock and poorer for the loss of jewellery, iPods, cash and a half-drunk bottle of Champagne. ‘‘The guy had to clamber across a rock platform at low tide to get to our property,” says Tamara. “We honestly thought a break and enter would never happen – we live in a small block where you have to enter a security code to get in, so I didn’t think we needed insurance.”

According to an NRMA Insurance report published in December 2005, the largest proportion of home insurance claims come from storm damage (33 per cent), followed by theft (21 per cent). Another threat is house fires – NRMA says six fires are reported by customers in NSW each day, and generally fires cost the community more than $45 million annually.

While fires may represent only a small portion of claims (two per cent), they bring huge financial hardship. Home owners usually under-calculate the replacement value of the building and contents in their insurance. The cost of relocation and replacing possessions until the money comes through hits hard, and insurers only cover reasonable replacement and repairs – not actual alterations on a building if it’s partly destroyed.

Says one victim, a mother of three, “The frightening thing was how fast the fire ripped through the house. I was at my computer with the headphones on when my husband called out to me. In the space of about one minute, the fire had gone into the roof and spread through the ceiling. Luckily, the kids weren’t home because I just had time to get out.”

But the speedy departure meant there was no time to take anything other than her purse and to see their dog safe.

Given that most people spend at least $400,000 on their home and contents, it’s definitely worth protecting. Rental households only require contents insurance, but everyone can top up with policies for specified items such as collectables and jewellery.

To ensure you have the correct level of cover for your home, try one of the free building and contents value calculators on websites of general insurers such as AAMI, RACQ, Suncorp and Australian Pensioners Insurance Agency. The Australian Securities & Investments Commission (ASIC) also has a helpful report entitled Getting Home Insurance Right, which you can download at www.asic.gov.au.

 

Confidential cover

If you don’t like the idea of providing an insurer with a list of all your valuables, GIO’s new Platinum home and contents insurance allows items such as jewellery, designer clothes, antiques and artworks to be covered by a single policy. Aimed at consumers with $100,000 to $1 million in assets, it offers higher limits on valuables, reducing the need to list them individually and providing an easy and confidential way of insuring them. For more information, visit: www.gio.com.au/platinum.

Photography: Sam McAdam.