Why Policy Ownership Matters

SPEAKER_02 0:10

Today is going to be an interesting topic. We're gonna dive into the case study of insurance case. I've got Blake Sutton from Breach Line Insurance is with me. Hello, Blake.

SPEAKER_01 0:20

Hello. It's been a while. It's been it's been a while. It's been a very long time. In between drinks. In between drinks. We didn't have drinks. Yeah, well. Caps of coffee. Cups of coffee. Thank God you're clarified. Yeah.

SPEAKER_02 0:32

Now, Blake, you came today and you started telling me about the story, and I said, now let's jump in and let's record it for our listeners. Because I think it's super important. The policy ownership and what happens.

SPEAKER_00 0:42

Correct.

SPEAKER_02 0:43

Dive in.

SPEAKER_00 0:43

Yeah, well, I mean, talking through real-life claims experiences at present has drilled down on how important how important it is to, or not so much drilled down, reminded me to talk with my clients of how important it is to have the correct policy ownership. How that works is let's use life insurance as an example. If you are joint ownerships of a life insurance policy, you automatically become the beneficiary of the life insurance. And where that is really important is if you actually are making a claim because your other half has passed away, allows you to avoid having to wait for probate to have the policies paid out, which can mean the sum assured, the money that you've put in place to cover you for this, that, and the next thing is there when you need it to do what you want and not having to wait.

A Real Claim Gets Stuck

SPEAKER_02 1:44

Tell me about the case that you've recently had.

SPEAKER_00 1:47

So a client in their early 30s and been dealing with bowel cancer over about three or four year period. It's come, it's gone, it's come back. The nature of cancer. And within that time they had a full trauma claim payout, which has helped to deal with their situation. It's allowed them to to to seek out other treatment outside the public system. And a few years after that, it came back, and that's got to a point where unfortunately the worst happened, and that client has now passed away. And that's had that has led to the current claim for life insurance and the current debacle of this particular client I inherited through a referral, which was great, lovely people, but they weren't set up with joint ownership. This client had individual ownership, which has meant now that the claim is there, the policy has been on hold. Sorry, not the policy, the claim being issued and paid has been put on hold until probate is has has come through, which has been about two months.

SPEAKER_02 3:07

So that so that's two months of family not having access to the money to deal with funeral expenses.

Funeral Benefits And The Gaps

SPEAKER_00 3:17

Well, the fortunate thing is most life insurance policies have a funeral benefit built in which will pay out regardless of probate or ownership within five days.

SPEAKER_02 3:28

I don't think people know that.

SPEAKER_00 3:29

Yeah, well, that's this good education, and and a lot of people, well, a slightly off topic, on topic. A lot of people come to me and say, Blake, look, I need some funeral insurance. So no, you've got life insurance, but no, no, I need funeral insurance. No, we built life insurance in uh summer short to cover the cost of your funeral into your life insurance, and that and that um reiterates the point that we just made there that most life insurance policies have a funeral benefit built into it for those exact reasons. But the problem with that is it might not pay the full amount that covers the cost of your funeral, depending on what you're dealing with in it. That could be bringing family from up and down the country or even overseas. It might be paying for accommodation for flights, not just the actual cost of the funeral. Hence why, if you actually have the right setup or policy ownership structure, it alleviates that situation because the money's paid out pretty fast. You don't have to wait for probate.

SPEAKER_02 4:31

So, in the case of this couple, what they could have done to prevent the delay, can we just repeat that part? Or if they had joint ownership, then it would have would have released the money for the surviving partner.

SPEAKER_00 4:47

Yep, that's correct. So how fast? Within a week. Okay. Assuming that the death certificate came comes through, depending on how long it takes for the death certificate to be issued. I think that's issued via the the f the funeral.

SPEAKER_02 5:04

The death I think it's birth and death registrations.

SPEAKER_00 5:07

Yeah, that whole process would happen a lot faster. Why probate takes so long, I'm not too sure.

SPEAKER_02 5:14

But and it also depends, did you know, that whether people had a will or not. So if they didn't have a will, I think sometimes it could take even like six months.

SPEAKER_00 5:22

Yep, and then making sure yeah, that that's all part of it. So, and that's I mean, this all leads into the same

Wills And Estate Planning Basics

SPEAKER_00 5:28

thing, right? Estate planning is a huge part of insurance.

SPEAKER_01 5:32

Yeah.

SPEAKER_00 5:32

It's one thing having uh insurance if you for life insurance if you pass away to do this, that, and the next thing, but if it's not written down, then your wishes might not be might not be followed up. So having a will is super important to make sure that why you put your life insurance in place is dictated in case worst case, both people could be gone if it was a car accident as an example.

Updating Ownership After Life Changes

SPEAKER_02 5:57

So, how easy it is, let's say we've got a young person, they take our insurance because they don't have a partner, they take the policy owner as themselves, then they meet someone, they get married, they have a family. How easy is it to add a partner to be your policy owner?

SPEAKER_00 6:13

What does policy owner need to do? They need to talk with insurer or their advisor, and that's a bit of paperwork. It's pretty easy, it's a bit mind-numbing, but it's well worth the the paper paperwork to get it done. But a lot of the time, if you're not having your insurance policies reviewed, it's easy for these things to get missed.

SPEAKER_02 6:35

Yeah. So how often should people review that?

SPEAKER_00 6:38

I'd say people should review their policies at least every every two years, if not sooner. I I generally say every two years, unless there's been a major life change. Having a baby, baby, getting married, buying a house, rental property, married, all those big ticket items, which generally can change the shape of your insurance needs.

SPEAKER_02 7:00

Okay. I think that's a really timely reminder for our listeners. And to be honest, someone came across some of our older episodes and they said, Oh my god, you made me think about this. So this is good. I think what you and I are doing here is really putting our message out, yep. Educating, and it doesn't cost people to review their insurances.

SPEAKER_00 7:19

It doesn't.

SPEAKER_02 7:20

Maybe we should charge them. Maybe then they'll take it seriously.

SPEAKER_00 7:23

Well, this is it, that's the double-edged sword with uh insurance. I think some advisors charge a fee, but that can put people off dealing with them, correct, and then helping themselves. But if you if an insurance advisor has you as a client, they're getting paid a service and commission each year, which is covering that cost in itself. Hardest part through my experience is getting back in front of people, not because they don't like you or they don't want to deal with you, but it's the nature of talking insurance. You've done it all. Oh, yep, set and forget. But that's unfortunately the worst thing you can do is set and forget with these types of insurances. I mean, the last thing you would want to do is find yourself in a position of claiming in the future, and then the benefits that you receive fall short of what you actually need because you've never reviewed your insurance level. And most people, when they start out with insurance, they might be having a young family that drives the need for a lot of people. So therefore, they might have a lower level of insurance which matches that situation there. But in 10 years' time, they may have bought another property or their income has increased significantly, or they've had another kid, whatever it might be, but they haven't reviewed the cover, so their financial outgoings that they want protected is a lot higher than what it was originally. So therefore, what they get is better than nothing, but it might not cover that full situation.

SPEAKER_02 8:49

There are gaps.

SPEAKER_00 8:49

Yeah, and look, there can be the opposite situation where someone has never reviewed it and their risk is actually decreased, so they've been paying a lot more for insurance for a long period of time. But if they actually claim then they're gonna be well off from it. But wouldn't you rather be paying the level of cover that you need and putting that money elsewhere if you don't need to be paying a huge amount for insurance? The whole purpose of it is of bringing it back to that point of reviewing your cover every couple years or when there's a major life changing event is to make sure that you're not spending more on insurance than you need.

Underinsured In A Cost Crunch

SPEAKER_02 9:26

Yeah. And that's another thing as well that you've noticed recently where people are overinsured, maybe, and they have the wrong covers maybe for their more than ever.

SPEAKER_00 9:38

I'm finding people underinsured. Underinsured is definitely more common, I think, with the current cost of living, which seems to be this word that we hear all the time post-COVID, right? Oh, for the day where that changes back to more normality when we have a thriving economy, but people are pretty proactive in making sure they're not overinsured. Quite often I'll sit down with a client who Blake, I'm overinsured, I need to reduce costs. And I kind of know walking into that appointment, that you actually I can tell that you're underinsured by looking at what you've got in your situation without having that conversation. And what can happen a lot of the time is people walk away going, Oh, I can't reduce this cost, I need more in an ideal situation. But that exercise is also good for people because I think everyone wants to reduce costs where you can, and people look to their insurance to do that because it for a lot of people for a lot of us, it's our biggest monthly outcomes outside the mortgage.

SPEAKER_01 10:37

Yep.

SPEAKER_00 10:39

Why again it's so important to review that regularly so you understand why you took it out in the first place and that maybe you shouldn't be reducing that to save a few dollars. Look for it elsewhere. One less coffee is a good start a day. I love coffee, so I don't think I could reduce it. But that's yeah, once again, bringing it back to that whole point of it's important to review cover for numerous reasons, at the very least, to remind you of why you have it in the first place.

SPEAKER_02 11:08

I was about to say, I think a lot of the time I find people forget what covers they have as well.

SPEAKER_00 11:14

Yeah, no, it's hard to remember, right? And I think I'm we're so good at it because when we deal with it, we understand it day in and day out. What I say to a lot of my clients is as long as you're remembering and understand this conversation now, what I'm saying is what you understand why you're taking out this cover now and it makes sense, that's the main thing. Trust your trust your own decisions, and then let years later when you don't remember, we review and then remind you again. It's hard to retain all that information, but trust your gut decision at the time to take out X amount, yeah. But once again, review so you can keep on top of what you've got and make sure you're not over or underinsured. Yeah, it's that's the best way to do it.

SPEAKER_02 11:59

I feel like we've we've just blended two topics into one. Yeah, I think we have. Started was a policy on it and ended up with reviewing your insurances.

SPEAKER_00 12:07

But that's all because they are in the same scope, it's under the same umbrella, and they let these these conversations lead into the next, right?

Practical Reminder And Wrap Up

SPEAKER_02 12:15

No, beautiful. Blake, thank you so much for coming along today and sharing that timely reminder that if you have an insurance, you've taken it out ages ago, if you're the only policy owner, especially, please double check if you're now in the relationship because these things can affect your family once you're gone. Obviously, it's not your problem anymore once you're gone, but your family will be the ones dealing with that.

SPEAKER_00 12:35

You're welcome. Nice to be here.