1 Why Sovereign Adviser Use Only MARCH 2013 BUSINESS INSURANCE start-up INCOME protection
2 WHY SOVEREIGN? Our passion for service excellence coupled with our proven financial strength makes Sovereign New Zealand s leading life insurer. In times of uncertainty, it s good to know who you can trust. Sovereign has an A.M. Best financial strength rating of A+ (Superior)*, and year on year we pay out more claims than any other New Zealand life insurance provider. As a values-based company, we believe in putting people first. That means not only our customers but also our staff and the wider community. We re building a sustainable long-term business, to ensure we re there for our customers today, and for generations to come. So, no matter how life changes, you can depend on Sovereign. * Given by A.M. Best Inc., an approved insurance rating agency. A copy of the scale, of which this rating forms part of, is available from Sovereign. The information in this document is provided as a sales support tool to be used in conjunction with and subject to the appropriate policy wording and the relevant Competitor Comparison that provides specific benefit and definition level comparisons against the main providers of this cover. The information contained in this publication is general in nature and is not intended as advice. It may not be relevant to individual circumstances and before making any insurance decision, customers should consult a professional adviser. Copies of our disclosure statements are available on request, free of charge.
3 6 REASONS TO CHOOSE SOVEREIGN START-UP INCOME PROTECTION 1 Monthly benefit of up to $9,000 with no financial evidence required Sovereign recognises that only limited financial information is available during the start-up phase of business, which is why no financial underwriting is required to take out Start-Up. This makes it easy for your clients to take out a higher amount of cover than was previously available. 2 Claims paid in advance with no ACC offsets Sovereign also recognises that should something unexpected happen to a new business owner, they need to have the ability to generate income to help meet their needs and get their business back up and running as soon as possible. This feature means that approved claims will be paid as early as possible; your client will not have to wait until the end of the month for the claim to be paid. Having no ACC offsets supports this fast turnaround time, and in some cases, the client will get significantly more money than they would have if the claim payment were offset by their ACC entitlement. 3 Benefit periods of six, 12 and 24 months 4 Policy Term available to age 65 Clients who have claimed on Start-Up can continue to have affordable cover without being forced to transfer to products with high loadings or exclusions, or give up cover all together. 5 Upgrade as your business grows At the end of three years, with supporting financial evidence, clients are able to transfer to an appropriate Business or Personal income protection benefit. They also have the option of continuing their agreed value Start-Up policy. If your client does not provide appropriate financial evidence, their Start-Up policy will automatically convert to an indemnity contract. Start-Up is designed to be a limited risk product for people who have started a new business, which means there are limits on how much cover a client can obtain at this start-up phase. An upgrade path at the end of three years means your clients get access to a wider range of products, which provide more cover and have more comprehensive features and benefits. These options for continuity of cover help mitigate the risk of a client s cover ceasing prematurely, which is not only important for clients but also advisers operating in a newly-regulated environment. 6 Available to clients who have been self-employed for less than 36 months Sovereign acknowledges that it can take several years for a person to develop a business to the point where it is successful. That's why this type of cover is now available to clients who are in their first three years of operating a business. This provides you with a larger target market and greater cross-sell opportunities, while giving you an opportunity to revisit prospects that may have had affordability issues early on in the life of their business. If clients missed the opportunity to take out cover when they first went into business, the 36-month timeframe makes it easy for them to take out cover at a time that suits them. Providing your client with flexibility around the benefit period allows them to get back to their business sooner should they be off work due to a relatively minor accident or illness. Sovereign Why Sovereign Start-Up Income Protection 2
4 THE FACTS In 2010 there were approximately 37,000 pure business births in New Zealand, making up approximately 8% of the overall number of businesses % of these new businesses do not have any employees, leaving approximately 5,000 start-up businesses with employees. 1 The most popular sectors for growth 1 include: Rental, hiring and real estate 22.9% Science and technical 13.8% Construction 10.3% Financial and insurance services 8.3% Other 44.7% There is a significant failure rate amongst New Zealand businesses. In 2010 there were approximately 55,000 business deaths. 1 14% of New Zealand start-ups will not survive the first year. 1 The sectors with the largest failure rate 1 include: Rental, hiring and real estate 22.1% Science and technical 14% Construction 14.4% Other 49.5% 1 Statistics New Zealand, February Births are defined by GST registrations. Pure births exclude those enterprises reactivating a dormant GST number. GST de-registration constitutes a business death. 3 Sovereign Why Sovereign Start-Up Income Protection
5 Long-term worklessness is one of the greatest risks A review of % Adult Females (15 65) and 13.96% Adult Males (15 65) have a to public health disability that has kept them off work for six months or more. 2 Prof Sir Mansel Aylward, Chair of Public Health Wales, income protection claims showed that the older the claim, the less likely the claimant is to return to work in general, the chance of someone returning to work after one year is only 20%. In the study, the reasons for people not returning to work were often biopsychosocial the interrelation of medical and social factors with individual thought and behaviour. 3 Every day about 21 New Zealanders suffer a stroke. One quarter occur in people under 65 years of age. 4 At the time of the last census 20% of New Zealanders live with a disability. 2 In New Zealand, there are approximately 300 people suffering from Motor Neurone Disease at any one time. 5 2 Statistics New Zealand, Disability Survey 2006 (latest available) 3 Dr David Beaumont, Fit For Work (Occupational Medicine Specialist Services); Presentation to the Life Insurance Conference The Stroke Foundation of New Zealand, Motor Neurone Disease Association, Sovereign Why Sovereign Start-Up Income Protection 4
6 THE FACTS CLAIMS INFORMATION 41% of family businesses in New Zealand do not have life insurance to minimise financial loss from the death of the CEO. 1 48% of the succession plans held by family businesses in New Zealand do not cover unforeseen circumstances. 1 62% of family businesses in New Zealand do not have life insurance to minimise financial loss from the death of key family members. 1 New Zealand family businesses are under-insured. 1. The MGI 2007 Family and Private Business Survey In 2010, Sovereign paid out over $170,000 in Start-Up Income Protection claims, more than any other insurer. The most common Disability Income Protection claims were DUE TO: > Accidents and injuries > Cancer > Cardiovascular problems > Chronic conditions, such as pain disorders and fatigue syndromes > Degenerative conditions, including arthritis > Mental health problems > Musculo-skeletal problems (such as back injury) > Neurological conditions (such as stroke) > Paraplegia. 5 Sovereign Why Sovereign Start-Up Income Protection
7 Start-up Income CASE STUDY John starts his own plumbing business. He has worked as a plumber for the past 10 years and wants to make the big leap. He borrows $50,000 (secured against his house) to get the tools that are needed to start up his own business. After talking to his adviser, John takes out a Start-Up Income Protection policy. It is well suited to him, as he is newly self-employed. Regrettably, nine months into business, John hurts his back. The payments received from the insurance company enable John to meet loan repayments so that the company remains solvent and ready for him to continue trading once he has fully recovered. What could happen to a business if the main income generator was severely injured? What could have happened if the business wasn't covered? > Lost income causes the business to become insolvent almost overnight. > John attempts to continue working, aggravating his injury and causing long-term damage to his back. > John tries to sell the business to make sure he doesn't lose his house. I WANT MY BUSINESS TO SUCCEED The individuals and events depicted in this case study are an example of what could happen and are not based on an actual situation. Any similarity to any company, person (living or dead) is merely coincidental.
8 SOVEREIGN.CO.NZ Sovereign House 74 Taharoto Road, Takapuna, Auckland 0622 Private Bag Sovereign, Victoria Street West, Auckland 1142 Telephone: Fax Clients: The information contained in this brochure is general in nature and is not intended to be advice. We recommend that you speak with your adviser if you require advice in respect of your particular circumstances. Sovereign Assurance Company Limited. All rights reserved. Images used by permission