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Savings and insurance – the same as home loans and insurance

At a conference recently I had someone challenge me when I linked savings and insurance together closely.

Wednesday, May 11th 2011, 12:01AM 5 Comments

by Russell Hutchinson

They thought I should say ‘home loans and insurance’ go together. Well, I think that both do, in fact.Think about the similarities. Buying a home with a big mortgage is buying a future dream – you hope to repay the loan and have a freehold place to live in the future. If you die or become disabled that dream is probably lost – unless you can pay off the loan or meet the repayments with your insurance.

Saving for your retirement is similar. To retire with an income you need a large capital sum. If you die or become disabled you won’t be able to save it all up – or help your surviving partner save up for theirs – unless you have insurance that can pay out a lump sum, or make the contributions for you while you are disabled.

Politicians sadly, on both sides of the Tasman, seem to disagree. Our own KiwiSaver legislation forbids the inclusion of insurance. In Australia where it remains legal, they plan to ban commission payments for insurance included in superannuation plans.On the one hand, I think their views are short-sighted. Ensuring that you can achieve your retirement saving goal is something insurance can help with, and if someone has to sell it, then they need to be paid.

But look at it from the politician’s perspective for a moment. They are worried about the perception that their schemes are “too expensive” or “too complicated” and especially wish to avoid any suspicion that they help big fund managers and insurers at the expense of savers.In a sense, they are staying ‘on-mission’ – so should we.

That means it is your duty to keep linking these important issues together and addressing the need outside KiwiSaver.

« The Ordinary is Death to the Insurance BrokerSsshh, but it is still about selling »

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Comments from our readers

On 11 May 2011 at 6:23 pm sonal said:
My broker do not sell life insurance. so i will miss out the .15% discounted with sovereign?
what is the way for out ?
On 12 May 2011 at 4:02 pm 6ftndr said:
to Sonal -> what are you on? what do you mean? can you please learn english!

Russell, we certainly don't want life assurance lumped in with kiwisaver, but if we do then we also want trauma, tpd and ipp.

There is nothing wrong with a fee based approach, based on the complexity and time taken, i don't know what all the fuss is about.
On 12 May 2011 at 4:36 pm risky said:
6ftndr - your comments are not appreciated. can you please keep your clearly racist comments to yourself. YOur kind is not welcome in the profession. Good Returns - can you please remove his comment.
On 12 May 2011 at 7:42 pm denis said:
My view is that insurance is fine and investments are fine. We should all probably have both. But wrap them in the same product, and it's not fine.

Customers complain about low investment returns because of the cost of the insurance element. Savings and insurance should be flexible and independent of each other.

And for what it's worth, I don't think the poster's comment above is racist. Sonal's entry genuinely doesn't make sense. Yes, 6ftndr could have put it better, but it's a bit harsh to throw words like that around.
On 13 May 2011 at 3:58 pm Regan said:
Haven't advisers been using KiwiSaver as a lead-in to cross-sell insurance since it began? Anybody selling nothing but KiwiSaver won't make much of an income as shown by EoSaver, IRIS and Asteron getting out of it. Then there's good old Hulich. A former 'agent' of theirs was knocking on doors trying to sell a worthless "book" of hulich kiwisaver "clients" lol.

KiwiSaver is fine as is. I wish the government(s) past present and future would leave it the hell alone. As investor balances climb people will care more about it and it will become more of an election issue. I already thought that messing with it would be political suicide - who in their right mind would piss off such a large group of voters?

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