- NEWSDAY.CO.TT - A la Une - 04/Sep 09:28

The value of getting insurance: Life or death

Insurance is not just for people who have died; it's for the people who survive. People who die in accidents or because of illnesses leave families and loved ones behind to pick up the pieces and continue living. Even if you survive an accident or an illness, it could have lasting physical and psychological effects. In 2024, the American Cancer Society said young adults who were diagnosed, treated and survived cancer may later be exposed to a list of other complications such as impaired fertility, heart or lung problems, hearing or vision problems, organ failure, hormone deficiencies as well as an increased risk of developing another cancer later in life. The British Heart Foundation said a study done in 2024 revealed that while more than seven in ten people survive heart attacks, it could lead to further conditions such as heart failure, kidney failure, atrial fibrillation (irregular heartbeat) and stroke. All of these calamities come with high medical bills that can persist for the rest of your life. Physical therapy for injuries could last years and cost hundreds of thousands of dollars. Treatment for diseases and recovery from these diseases could also come at high costs as well. Jarod Perryman, managing director of Scotia Life, told Business Day at Scotiabank's office on Park Street that in TT, people are more likely to have to live through critical illness and injury than die before the age of 60. "The average person in TT is five or six times more likely to become critically ill than they are to actually die," he said. "You are more likely to get a stroke, cancer and heart disease before the age of 60." As a consequence, your income could be severely and negatively impacted. Individuals and families who depend on a sole breadwinner or people who partner with each other to maintain two-income homes could see a significant loss of revenue, which could snowball into financial ruin. "You will not be able to meet your financial obligations because you are incapacitated – lying on a hospital bed somewhere." Being in the financial services industry for 30 years, Perryman has seen the benefits of being financially prepared for any circumstance and the cost of being unprepared. In a conversation with Business Day on Insurance Awareness Month, Perryman said there needs to be a focus on the protection gap – the difference between optimal insurance coverage and actual coverage in every country. He said the right insurance coverage could mean the difference between simply surviving an injury or illness or emerging from an emergency a stronger person. "I have seen people transfer wealth with the stroke of a pen. I have seen people be able to create an estate that they were able to pass on to their children and grandchildren. On the other hand, I have seen families financially distraught because of a lack of insurance, because a family was dependent on a breadwinner and it was not in place, leading to homes being sold or a child who was looking forward to furthering their education not being able to go to university. "So insurance can be a very powerful tool and the lack of it can really create financial havoc." The insurance coverage gap Perryman explained that a general rule of thumb is that a person needs insurance coverage that is at least ten times their annual income. "Let’s assume you are making $150,000 a year. You would need at least $1.5 million. "The thinking behind this is your family will be able to exist, survive and, in some instances, thrive without you physically being there." He said how much insurance a person needs depends on certain factors, which include the person’s debts and their current health. "Someone who is 35 and has a lot of debt needs a lot more insurance than someone who is 35 and has no debt at all." He said insurance was one of the four key pillars of financial planning – an emergency fund, a protection plan, an investment and a retirement plan. "You might be earning $15,000 a month, but of that $8,000 is for expenses. "You should have an emergency fund of six months, which would be about $48,000 put down. "You know what tends to happen – the shocks on the car, doesn't tell the fridge when it's going bad and the stove doesn’t tell the air conditioner in your car when it's going bad. They tend to all go bad at the same time, according to Murphy's law. So you should have an emergency fund set aside for six months of expenditure money to deal with that situation." With regard to investment, Perryman said there were two types – capital-intensive investments such as shares and equities in businesses and monetary investments, like mutual funds and bonds. [caption id="attachment_1175968" align="alignnone" width="1024"] ScotiaLife TT’s managing director Jarod Perryman at Scotiabank's Park and Richmond Street branch, Port of Spain, on August 28. - Photo by Ayanna Kinsale[/caption] However, he said insurance coverage assists with the other two pillars – protection and retirement. "Your protection block deals with your health insurance and your life insurance. "Ultimately, if you have to get a surgery done or you have to go to the doctor or dentist, whatever you need, you’re covered. "People also wait too long to prepare for retirement," he added. "As a consequence, you need to put big chunks of money away to get to a place of comfort." Despite insurance being so important to financial planning, Perryman said in TT, there are several people who are under-insured or have no insurance altogether. He noted that in some cases, younger people may not feel they need insurance because they feel as though they are invincible and no serious harm can come to them. In other cases, where people are older, they may not fully trust insurance brokers. To both he said it was better to have insurance and not need it, rather than need it and not have it. "The time value of money is such a critically important tool for younger generations. If they start something at 25 with the goal of getting to $10 million by 60, your contribution would be around $500. But if you delay that, let’s say by 15 years and you start at 40, your contribution goes from $500 to $1,000 just because you missed that window. "I would say to younger people, I understand you probably aren’t thinking about accumulating assets because younger generations are all about experiences, but you would want to walk the path of giving yourself choice. Financial planning, of which insurance is an important part, gives you the opportunity to start younger, start smaller and build up." For older generations, he noted that insurance companies accept applications for insurance coverage up to 70 years. "So you could be 60 or about to retire and you can still make an application for life insurance coverage." For those who are sceptical about insurance, he said they need to experience what that level of financial planning can do for them. "The individual who has had the benefit of receiving a life insurance claim which allows him to stay in his house, continue to drive his car and send his children to university – that person understands the value of life insurance. "I have seen life insurance and the benefits of life insurance change the lives of people in front of me, ensuring financial continuity, ensuring financial ruin is avoided and as a consequence, lives are conserved and in some instances, bettered." Challenges facing the insurance industry Climate change and a lack of investable assets are at the forefront of challenges to the insurance industry. Perryman explained that while these challenges may have varied effects on the industry, insurers have faced these challenges head-on. With regard to climate change, he said it may not be a challenge specific to life insurance coverage; it affects the cost of insurance coverage on the whole. "What you find happening is a lot of the general insurers have challenges with respect to reinsurance rates. If my insurer is Swiss Re or Munich Re and because they have claims to pay across the Caribbean and sometimes in Europe or in Central America because of floods or hurricanes, you find that they tend to apply rate increases across the board for all their clients." With regard to life insurance, Perryman said finding good places to invest its money to ensure that its clients are covered is one of the greater challenges. "If you come to me and say this is $1,000 – I want to give this to you on a monthly basis and at retirement, I want to be able to get a pension of $15,000 a month. I would need to find an asset that is going to give me a return, in order for you to get that $15,000. "We have found that recently there is not as many investable assets available within the market to allow us to be able to get that return." He said that government bonds and other investable assets that have come to market recently have been able to fill that need. Additionally, it is a challenge to find the right person to be an insurance agent. Perryman said it takes a specific set of hard and soft skills to become an insurance agent. "Gone are the days when somebody could be an advisor and all they would have passed was the state licensing exam years ago and you have never done anything since. "Every single year you need to be upskilling yourself to get to a place of increasing competence." He said most agents come into companies having completed O-levels or have gotten to their first degree. From there, they would have what he described as continuing professional credits that requires agents to upskill themselves. "This is to ensure that you have value-based conversations with customers and you can handle work at a particular level. "Once you come through the door, we have a road map of training and certification that takes place both internally and externally. "These will carry agents through both in terms of the technical side of the job as well as the softer skills required to succeed." Perryman said in many cases, softer skills are more important than the technical skills. Skills such as emotional intelligence and understanding people makes the difference for a successful agent. "I have found that people who build successful businesses understand what makes people tick, and they make that a point of connection. "Your ability to engage with someone on an emotional level and understand where someone is emotionally is an important skill to have."   The post The value of getting insurance: Life or death appeared first on Trinidad and Tobago Newsday.