Joint ownership is a simple reality of many small and medium size businesses.  The aim of key person insurance is to insure business continuity. Partners, shareholders and lenders to small business can secure their investments by requiring key person insurance be taken by all the shareholders. 

How it works

Consider this example;   In a two person business, Jane and Peter have an equal ownership stake. As is often the case, an agreed “buy out” option exists that can be exercised by one partner upon the death of the other. This is often an arrangement between shareholders. If Peter dies, then Jane needs to “buy out” Peters share in the business. Problem is, Jane may be in no financial position to do this. If the business were to fund Peter’s buy-out, then Jane would be left with a “loan” in place of Peter as a shareholder.  The other option for Jane is to find a new investor/partner to buy Peter’s stake. Otherwise Jane simply inherits Peter’s “family” as her new partner. In all scenarios, Janes bargaining power is limited and the continuity of the business is at risk.

However, if Jane and Peter had purchased life cover policies and made each other the benefactor, then on Peter’s death, Jane will receive a cash lump sum. This money is then used to buy out Peter’s share and can also be used to fund any loans or shareholder liabilities Peter may have been responsible for in the business.  

Key person insurance… a simple solution for potentially a big problem J

Finally…

 Pinnacle Life has been able to remove the last remaining piece of paper from the process of buying life insurance.

Actually that’s not quite true.  The process was always 100% paperless if you paid by credit card or by internet banking, but not for direct debit payments.  To authorise a direct debit, you always needed to sign a piece of paper that Pinnacle Life conveniently attached to the policy document.

Happily, this is no longer so…

Now that the NZ banking industry has moved with the times, online direct debits have just become possible.

So at Pinnacle Life you can now authorise your direct debit and pay for your policy simply by ticking a few boxes and entering your account number on the Pinnacle Life website when you buy a policy.  (Buy a policy and see for yourselfJ)

Quick, simple, clean and… green.  Here’s to saving those forests.

Good life insurance adverts are hard to come by.

But there are exceptions…

see this Youtube advert for life insurance

Couldn’t help commenting on a not-so-politically-correct story in the Herald the other day by Deborah Coddington about…

o—b—e—s—i—t—y.  

According to Deborah, John Birkbeck, a professor in human nutrition from Massey University told a journalist “You can’t get over-fat without eating more calories than you expend.”

Seems this wasn’t the PC thing to say.  Anyway… that’s not what I want to talk about.

Deborah’s article goes on to say how we dance around the ‘fat’ issue so as not to hurt people’s feelings but we don’t mind confronting people head on when it comes to charging higher life insurance premiums.

Whilst we’re happy to discriminate against all and sundry… we’re way too PC to discriminate against obesity.

Well I’m here to tell you that Life Insurance is the great leveller. You see, it’s all about mortality statistics, and the fact is, obese people die earlier.

So yes, WE DO CHARGE MORE if you are, ahem, short for your weight.

And because we have statistics to back up our pricing, it’s NOT discrimination.

Finally… how do we work out what premiums to charge?  We ask you on your insurance application to tell us your height and weight then we sneakily work out your BMI. BMI stands for body mass index, calculated by taking your mass in kilograms and dividing it by the square of your height in metres. Generally a ‘healthy’ range is around 18.5 to 32. Higher than around 32 increases your mortality risk and attracts higher insurance premiums.

When planning a family it is wise to consider taking out a life insurance policy before falling pregnant as insurance companies are reluctant about issuing life cover for a woman who is already pregnant, due to all the possible complications that could occur.

At Pinnacle Life, we generally learn about pregnant woman applicants in the question “are you seeking medical advice”. In order to ascertain the stage of pregnancy the applicant is sent to underwriting.

Our policy is to defer cover if the application is made after the second trimester (end of week 26).  We defer until two months after child birth…

 Why you may ask?

·         High blood pressure is a common complaint of pregnancy and can lead to hypertension and even toxaemia.

·         Once in your third trimester, it is very difficult to get life insurance as pre-existing medical conditions can advance rapidly during pregnancy and conditions not already picked up will become more dominant and detectable.

·         There is the risk of post natal depression immediately after the birth

·         An added problem to trying to secure life insurance for women is that we are now seeing a new generation of higher risk pregnancies being made available by the advancements in medical technology – not always a good thing. Pregnancy is increasingly possible in older women with IVF treatment. They are also more at risk from the complications of higher blood pressure. This treatment itself carries a high risk of multiple births, again putting a strain on the woman’s health.

Take out a life insurance policy before getting pregnant wherever possible. After the event, always be upfront in declaring your medical history.