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Financial Risk Management Utilising Insurance Products

In this newsletter: 
Overview
Financial Risk Management
Coronavirus Lessons
2021/2022 Forecast
Expect More Taxes
Risk Management Reflections
Action Plan
The Cash Reserve Fund
Insurance Audit
Why Kevin 
Referrals
Disclosure

The 2020/2021 financial year has come and gone and we still live to tell the tale.
Before we can go forward with confidence and optimism after any crisis, it is important to review history and reflect on what has happened during this latest crisis period.
Covid-19 ranks alongside the top five hardship periods I have experienced over my 50 year working history, alongside Roger Douglas’s economic reforms of the 1980’s, the sharemarket crash of 1987, Y2K and the global meltdown, 9/11, the Canterbury Earthquakes and now the malaise from the Coronavirus.
For many ordinary Kiwis, the effects will be felt for generations.
Many have lost their jobs, careers, businesses, assets, savings, devastated their retirement accounts and destroyed their retirement plans; and for some their greatest asset – their health.
Please take comfort from the fact that no-one could have foreseen this global disaster, or the way in which it has been managed/mismanaged, resulting in the casualties in the name of good intentions for which only history will judge the correct solution from hindsight.

Risk Management
Our role as a financial risk manager is to help guide you through the roadblocks and to smooth the bumps, in the event of a future disaster that could impact you and your family. Our advice and mitigating strategies are designed to protect you from the outcomes of declining assets or underperforming assets, as well as unforeseen events such as death, illness, accident, loss of job or business failure through the implementation of investment or insurance contracts.
The strategies and products we recommend are purchased to varying degrees based on your willingness and or ability to accept risk. In most instances we find that most clients have more risk than they can actually bear.
The decision is not what you are prepared to pay for the protection, but what you are prepared to lose if you don’t. 

Coronavirus Lessons
Throughout  the financial year 2020/2021, I spent most of the year assisting clients in managing their financial cash flows, caused by the lockdowns and general business downturn. The major assistance I was able to provide through our product selection of Asteron, for many clients, was to claim on the hardship benefit and apply to put their insurance premiums on hold for up to 6 months and still be continuously covered whilst not having to repay the premiums. No other product provider offers this benefit. This premium suspension benefit has been a godsend for many clients caught in the Covid downturn.

2021/2022 Forecast
Having signed off the year end accounts, I am now reflecting on last year and forecasting a more stable 2021 and beyond. Barring any government’ knee jerk’ reactions created through the new trans-Tasman bubble. 
I am anticipating that sanity will return to economic management around the world with economies reopening cautiously over the next few months. The reality is that governments around the world are now recognizing that they cannot sacrifice their economies for health issues such as has been their actions created during the Coronavirus. The debt they (and the New Zealand government) have created will take many years to repay, if at all, and this will be what our children and grandchildren will inherit. This will inevitably result in higher taxes, reduced Government spending resulting in less safety nets and sustainable long-term programs and commitments, as future governments grapple with debt laden balance sheets.

Expect More Taxes: The first – the Brightline Test (capital gains tax by another name)
In New Zealand we have seen the first of many new taxes in the form of the extension to the bright line test for investment property, which means that if you sell a property within 10 years (not your family home) you will pay tax on any profit at your then marginal rate. An owner of a property (not their family home) will also not be able to claim the interest on the property as a tax deduction.
This will realign the investment strategy and priorities for many people either in, or contemplating investment in residential property. I expect that death duties which is currently zero rated will re-emerge and tax rates will increase.  Accordingly, I would not be recommending the early cancellation of life insurance policies over the next three to four years, if you own more than $1 million in net assets.
When death duties applied in New Zealand, life insurance was historically the mechanism to create the money to pay the tax department which then preserved the value of the estate for the ultimate beneficiaries. Otherwise, the asset had to be sold and the tax of 40% minimised the distribution to beneficiaries. 

Risk Management Reflections
After any downturn it is important that you stop and review your new personal and financial structure, your goals and objectives and most importantly your risk management umbrella.
Many things could have changed.
Do you still have a job?  Is it safe and secure? Should you consider redundancy insurance?                
Do you still have debt? Is it protected? Life, Trauma, TPD, Income Protection, Medical and Redundancy Insurance .
Do you still have dependents relying on you personally or financially? Life, Trauma, TPD, Income Protection, Medical and Redundancy Insurance.
Have you still got a business? Is there a Key person contract over key staff who are key to, or generate the business income? Do you have a funded Buy/Sell agreement in the event of death or disablement of company shareholders. What is their financial position? Are your personal assets protected if you become jointly and severally liable?
Have your cash reserves been affected by Covid?
Do you still need to plan for retirement? Are you in the most appropriate asset allocation for your current funds? Are you maximizing dollar cost average?
Are you already in retirement and your retirement savings are not producing the return you need to maintain your lifestyle? Is your investment strategy and asset allocation appropriate?

Action Plan
Right now, TODAY, is the very time to rethink your long-term investment options.
Through the Maurice Trapp Group acquisition of KSL Insurance we can now assist you.
If you are interested in having an Audit of your Insurance program or a discussion on Kiwisaver or investment options, call me to discuss.
2020 was all about arranging premium relief and restructuring clients’ insurance.
2021 is the reset. If we know nothing else, it is that another disaster will likely occur in our lifetime. It is the wise that learn from the past and plan for the future so the lumps and bumps in the journey of life are smoothed by appropriate risk management strategies. 
Last week I took the opportunity of a ‘well-earned’ break by exploring the Catlins, my family history in Lawrence, and E-bike riding in and around Wanaka. While away I took the time to reflect on 2020, the outcomes of what the Coronavirus has done to us as a society and what I can do to help my security conscious clients. After 10 days of relaxing, it reaffirmed that I am not ready to retire.
I am happy to continue working, doing what I love, and educating people about insurance as a risk management tool.  

Coronavirus, if nothing else, should have taught us that, unlike normal economic downturns created through inflation, stagflation, falling asset prices for long periods of time, and other man-made financial mismanagements, disasters happen e.g. earthquakes, chemical disasters, floods and fires and now biological viruses.

We must more than ever be prepared for uncertain times. Financial discipline is required to combat and mitigate the effect of these disasters. Highlighted below are some strategies I have promoted over the past 40 years that may assist you and or your family members.  

The Cash Reserve Fund
“Everybody should own a ‘Do Not Touch’ three-month cash reserve account.”
If you do not have this cash reserve account, you can fast-track its creation. For instance temporarily stopping socializing, coffees, trips and travel, movies and other forms of entertainment that takes away the discretionary dollar until you have saved a three-month cash reserve account.   
Once this account is in place it should not be touched. If a catastrophe occurs again in your lifetime such as a ‘lock down’ you are financially independent for three months. As your salary or income increases the cash reserve needs to be ‘topped up’ to this 3 month level.
Once you have created your ‘Do Not Touch’ cash reserve account, you are then able to live by the 10:20:70 Rule.
10% of what you earn (gross) is applied to your long-term retirement account. From this account you will arrange your life insurance and risk management program. The balance of the 10% will then be applied to your Kiwisaver retirement account. Wherever possible and available, insurance should be arranged on a level premium basis.
20% of your (net) earnings are used for mortgage and debt repayment
70% of your (net) earnings are used for living. 

Insurance Audit
Coronavirus took everybody completely by surprise and destroyed for many their retirement plans, cash reserves, businesses, and in many instances their health, by not being able to obtain appropriate and timely medical treatments caused by the breakdown in the public health system.
It is now time for every insurance conscious person to audit their current program to ensure that they have the most appropriate insurance contracts, can afford to continue to fund these policies, and have contracts with companies that will provide premium relief when and if a further downturn occurs.

Why Undertake an Audit or Advice From Me
You, your family, business colleagues, and loved ones need professional and unbiased advice.
You need, and should, only purchase the best insurance products that will stand the test of time, irrespective of cost, with companies that have the capacity to pay the claims in full, precisely when required, on time ‘hassle free’.
You need to be advised appropriately on who should own the policy, and how to fund your insurance program, so it will be affordable and in place when a claim occurs.
With my extensive experience as a Broker and now a Pre-Claims Auditor, I can provide you with a unique Pre-Claims Audit. The Audit sets out how your policy will respond at claim-time, the limitations and alternative options.
My Pre-Claims Audit is unique and comes from 50 years of commercial, financial, investment and life insurance experience along with all the scars.
You and your family, more than ever, require this Audit to be undertaken to ensure that you can withstand the next disaster.
If you are in your early 50s and 60s planning for a retirement at age 65 you will need to be aware that you will be facing the daunting task of investing your nest egg in an environment offering 1% to 2% interest rates and an uncertain future as Governments grapple with fiscal debt.
Risk management will become part of the new norm, as you plan for your retirement on the basis of higher risk/return investment strategies which will involve higher levels of volatility.
Insurance will become ever more important as the Government benefit programs become asset and/or income tested. Medical services will become restricted through the shrinking of health budgets. This will place greater emphasis on private medical facilities and services and long-term care being required for the surviving elderly.

Referrals
As you know I do not advertise my services. I work exclusively within my client base and grow my business from referrals from my clients. If you do not require my services personally, but have a son, daughter, family friend or business colleague that may benefit from my advice, please forward on this email and/or text or email their contact details to me at 021 240 4540 or kevin@ksl.co.nz
I wish you well in resetting your personal and business plans for whatever 2021 holds in store for you.

Disclosure Document
Click here to download our new initial disclosure document. Can you please acknowledge receipt by signing the initial disclosure document and email back to Sharon so we have a record that you are aware of our terms of business and the advice and services we provide.

I hope this information and my overview is of value to you.

Kind regards 
Kevin

2020 Reflections and 2021

As we celebrate Christmas and put 2020 behind us we should all take a few moments to reflect on managing our affairs in 2021.

To help you in this task we have identified a number of perspectives that we want you to consider:

Survival Funds  – Establish a ‘Rainy Day Fund’

  • You need to have the equivalent of 3 months of your income as savings in your ‘Rainy Day Fund’.
  • You need to create a ‘do not touch’ rule that prevents it being used for holidays or cars and other discretionary purchases.

Protect Your Income – Your Most Important Asset

  • Ask yourself what happens to you, if over the coming week you were advised by your medical experts that you can’t work for the next 3 months because of  illness.
  • If you have no Survival Fund, then what do you do?
  • You need to consider a Loss of Earnings Agreed Value insurance policy which will cover up to 75% of your taxable earnings.

Trauma / Crisis Management

  • Trauma Insurance, next to medical insurance, is the most ‘claimed on’ product within the life insurance industry. Statistically 33% of New Zealanders will suffer a significant medical trauma, be it accident or sickness, between age 25 and age 65.
  • We recommend that every income earner needs to cover a minimum 12 months’ household income plus two years rent or mortgage repayments.

Your Children’s Options For Their Future

  • Kids’ Trauma Insurance with Guaranteed Future Insurability
  • We recommend a sum insured of $100,000 per child for a cost of as little as $5.00 per month per child.
  • At the age of 21 the child can then take over the policy.
  • You are insuring your children’s insurability for a further $300,000 of cover without further medical or lifestyle underwriting.

Medical Care When You Need It

  • Make sure you purchase the best available medical insurance program prior to the onset of medical decline
  • Once you have a medical problem you are no longer insurable at standard rates, if at all.
  • The most important part of a medical policy is identifying one that will pay non-Pharmac approved drugs and therapies.

Making Insurance Affordable In Your Later Years

  • Convert insurance that you know you will need to retain in your later life to Level Premium
  • Level Premium ensures that you will always be able to afford to pay the premiums on the ‘core’ long term portion of your insurance protection.

Retirement – Save Earlier And Budget More

  • In the magazine Rethinking Retirement, four tips were:
  • Prepare a budget and stick to it.
  • Emergency funds are for actual unforeseen expenses not ones you can budget for.
  • Maintain adequate insurance for the things you cannot afford to fund or lose.
  • You always need a back-up plan i.e. part time work, renting out space in your office, garage or home. Home equity release loans etc.

We Can Help
If, after reflecting on the above,  you need to discuss any of these perspectives then please feel free to contact Kevin or Brian at any stage. Their contact details are as follows:

  • Kevin – mobile 021 240 4540, email kevin@ksl.co.nz
  • Brian – mobile 021 227 6035, email brian@ksl.co.nz

Otherwise we will contact you during 2021 as part of our annual review process.

Wishing you a Merry Christmas and a happy and safe festive season.

The Power of Now and Level Premium

The Power of Now versus The Consequences of Delay

I keep saying to clients “the healthiest you are when applying for insurance is today….. in most instances you will not receive a better offer of terms then how you present today

Prior to Christmas 2019 I prepared an audit report with recommendations for a business colleague. Instead of taking the time to act on the advice (which he knew he had to take) he said he would “look at the report over Christmas and get back to me in the new year”.

During the Christmas break after an extensive mountain bike ride he had some health related issues which he was advised to be investigated on his return. But after having had a well-rested time away with family, the condition did not seem to bother him further and he did not pursue the recommended investigations.

Coping In The Post Covid-19 Times

Questions that you need to ask

Now that we are back to level 1 the tough questions you must ask are:

  • What’s my income per week or month?
  • How much am I saving per week or month?
  • Do I have a ‘rainy day’ reserve?
  • How long can I survive without a paycheque?
  • Is my job safe?
  • Will my insurance programme cover my risks?

How KSL Insurance can help

I expect that my 50 years of commercial experience and insurance expertise will be required more than ever. Everyone should now undertake a full personal and family risk assessment followed by a review of their insurance arrangements. In assessing risk there are two perspectives that you need to think about:

Hardship – We Are Here To Help

Premium relief is available and we can help you

As an essential service business during the Covid-19 lockdown period, KSL Insurance advisers and staff have been working remotely from our homes. We are open for business and can help you with a review of your insurances which for a lot of our clients this is timely.

Our advisers have been ringing as many clients as we can over the past two weeks to see if you need any advice or premium relief assistance in respect to your insurance program as a result of the Covid-19 crisis.

We are very aware that the longer we remain in lockdown the more complex our lives become and the considerable uncertainty and anxiety for many. Uncertainty of incomes, possible loss of employment, questions of sustainability of businesses are some of the major issues many will be confronting. It is therefore very important that you identify and take advantage of all the support networks that you have available to you.

Coronavirus

The events of the last three weeks have changed the environment that we operate in and consequently we have devoted a substantial part of this newsletter to what we now all need to focus on. Please make certain that you are aware of the steps that you can take to minimize the effect that Coronavirus is going to have on you and your family’s wellbeing.

We were originally intending that this newsletter would share with our clients the focus of the Maurice Trapp Group’s (our business owner), strategy of  providing “best practice” sales and service consistent with the KSL Insurance “we care” philosophy. It is the Maurice Trapp Group’s intention to grow KSL Insurance and to offer additional services and products over time to our clients.

KSL Insurance will be appointing highly qualified advisers who can provide quality advice to clients in the ongoing servicing and auditing of new and existing clients’  insurance portfolios.

Coronavirus (COVID-19)

We are all embarking on a journey that we are very unfamiliar with. Notwithstanding this unfamiliarity, we must be steadfast in the belief that we can successfully make the journey, however long. And when it does end, we will be forever changed in terms of our attitudes, our future approach to risk and insurance, how we engage with others, and how we transact business.

Covid-19 Level 4 Lockdown

Dear Clients
We have been closely monitoring the Covid-19 pandemic progression worldwide and the response, including that of our government. We are supportive of the measures taken to protect New Zealanders. In response our office at Ferry Road is now closed until further notice.
However, please be assured that we are alert to the consequences of the pandemic and the consequences of the closedown on our clients.  We are now working remotely and your adviser and the support team can be contacted as follows:

Kevin Seque, mobile 021 240 4540, or email kevin@ksl.co.nz

Brian Seque, mobile 021 227 6035, or email brian@ksl.co.nz

Grace Downs, mobile 027 652 4334, or email grace@ksl.co.nz

Jack Radford, mobile 021 627 049, or email jack@ksl.co.nz

Sharon Empson, redirect from 03 365 4460, or email sharon@ksl.co.nz

Do not hesitate to be in touch with us.
Kind regards and stay safe
from the team at KSL Insurance

 

Risk Consequences of Coronavirus

Coronavirus    

The outbreak of the Coronavirus has captured all our attention and as yet we still do not have a clear view of what is going to happen in the future. The uncertainties of the ability for the virus to be largely contained with China remain, and the prospect of it spreading aggressively in other countries still exists.  Thankfully the New Zealand government followed the quarantine measures introduced by many countries, including Australia and the US, which stopped all flights to and from mainland China.

So what should you do now from a risk management perspective?

The potential impact of the Coronavirus started me thinking about the reason people have for owning personal insurance policies. Basically it is to provide financial certainty if something catastrophic occurs that their assets and their families are safe and protected from life’s curveballs.

I see the Coronavirus as one of those potential curveballs that is totally outside our control and could be devastating. So, I set out a series of questions for you to answer to check if you are prepared for this now ‘known’ event that may come our way.

  • Will you leave your family with a secure financial position if you die next week?
  • What happens if you cannot work for between 3 and 6 months due to illness. Will your employer continue to pay you or can your business afford to pay for your replacement?
  • Are you financially prepared if you suffered a major trauma or critical illness?
  • What would happen if you were diagnosed as being permanently disabled and no longer able to ever work again?
  • Are you prepared financially for a non-urgent elective surgery costing $30,000  or more?

Coronavirus and its effects should motivate you to revisit your insurance portfolio to ensure that you have the correct levels of insurance, funded appropriately, correct ownership and that you are confident that the insurer has the financial capacity to pay.

It is extremely important that the insurance company managing and underwriting you and your family’s financial future, has the international strength and financial capacity to meet catastrophic claims conditions. KSL’s recommended panel of insurers do.

Your Preparedness Action Plan

Having been a survivor of both a heart attack and cancer I can certify that “I am financially prepared”. Are you?

My intention in this letter is not to create alarm; rather it is to urge you to make sure you are prepared for whatever may happen.

Contact me on telephone 021 240 4540 or email me at kevin@ksl.co.nz to arrange a suitable time to catch up and review your insurance program.

I look forward to working with you.

Kind regards

KSL Insurance Limited

Kevin Seque AFA
FSP 108805
Insurance and Audit Specialist

Some Topics to Think About for 2020

Managing your insurance portfolio  

Effectively developing and managing our personal insurance portfolio is a critical part of assuring that our family’s financial security and lifestyle is not put at risk. Just as we are encouraged to develop long term savings strategies for our retirement by establishing a portfolio of assets, we also need risk management strategies to protect our income that is used to generate our savings, and to ensure adverse health and accident events do not prevent us from being able to retain our asset portfolio.

For many people understanding the issues, analysis and jargon of personal insurance is daunting and often results in ‘whatever you think is best for me’ solutions. Consequently, deciding who you are going to work with in developing your personal insurance portfolio is one of the more important decisions you make in planning your  life’s journey;  it is much like deciding on who your solicitor, accountant or doctor will be.

A recent survey(1) undertaken by the Financial Services Council identified that  ‘peace of mind’ is paramount to people when taking out a personal insurance policy. This peace of mind stems from the relationship between the person selling and the person buying; in very simple terms,  it is ‘trust’. And as one respondent from the above survey commented: “Also, with peace of mind you feel more in control. You are able to carry on.”

Choosing your adviser    

So let’s take you on a journey where you can explore what you need to know in choosing an adviser to help you develop and manage your personal insurance portfolio.The first thing you need to accept is ‘this is going to be an important relationship that, if successful, will last your lifetime and beyond.’ Hence the initial focus has to be on trusting your adviser.  This comes from many  perspectives but there are five things about advisers that are particularly important; being able to listen, being able to understand your point of view, having the background and experience, being with you for the long haul, and doing what they say they are going to do.

In the insurance industry there are many differing labels used to describe marketing and sales people including insurance agents, advisers, and brokers. Some are employees and some are independent contractors. Some have an almost tied relationship with one insurance company, while others use a wider range. Some are on a salary, some are on retainers, some are on commission on new sales, and some are on a combination of commission on new sales and servicing fees from existing clients.

For the typical family the insurance adviser must commit to a long term relationship. In doing so there needs to be a process in place whereby regular (annual) reviews are undertaken to ensure your insurance portfolio is appropriate for your family’s evolving circumstances.

At KSL Insurance Limited we recognise that we are in the people industry. We help families weather the storms they face and underpin their future success. While we are small in terms of the number of people in Christchurch, we are large in terms of our experience (Kevin 49 years, Brian 23 years) and resources we can call on to help.

Now having the Maurice Trapp Group as one of our major shareholders means that we have access to a broad range of additional skills and resources, as well as providing continuity in terms of succession.

The Art of Survival : Take the Test

What is your most valuable asset?
I am frequently asked what the most valuable asset a person can have; my answer is always the same. Your ability to earn…. and the only thing stopping you from earning is your health. While we all understand this, it is surprising that insurance to protect personal income is still one of the least popular mainstream insurance policies purchased.

The Reasons for not having Income Protection Insurance?

  • Cost…the perception that the cost of premiums cannot be justified.
  • ‘It will never happen to me’ attitude to accidents and illness.
  • The Government will protect me through ACC and sickness benefits.

The Consequences of not having Income Protection Insurance?
Most New Zealand families live payday to payday;  80% of New Zealanders families cannot scrape together $10,000 in cash for an emergency without mortgaging something.  I have watched the bitter experiences of a number of my clients when their ‘secure’ world collapses after losing their income through accident or illness resulting in financial ruin that follows from not owning income protection insurance. The consequence that follow include:

  • Using your retirement savings
  • Asking your extended family for help
  • Having to access social welfare support
  • Using charities such as ‘Givealittle’ pages
  • Losing the family home