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How The Terminal Illness Benefit Works In Life Insurance · That Home Loan Hub

• 0:10
  SPEAKER_01: In a previous episode with Blake, we touched a lot on policy reviews and how important it is to make sure that the policy owners are the right ones.
• 0:18
  SPEAKER_01: He's mentioned a case study of a recent client claim that had trauma covers and things like that.
• 0:24
  SPEAKER_01: So that made us think about do people actually understand what is terminal illness?
• 0:29
  SPEAKER_01: Blake, hello.
• 0:30
  SPEAKER_01: Hi.
• 0:31
  SPEAKER_01: Let's dive into what is terminal illness and what is the cover that helps to pay out for terminal illness.
• 0:37
  SPEAKER_00: I thought it was an interesting subject for us to talk about.
• 0:41
  SPEAKER_00: Just to provide some clarity for your listeners, what a lot of people don't understand is life insurance pays out if you pass away.
• 0:50
  SPEAKER_00: Everyone knows that.
• 0:50
  SPEAKER_00: Pays out money to your estate or your loved ones.
• 0:54
  SPEAKER_00: Now, what a lot of people don't understand is that built into every life insurance policy, or most I should say, is a terminal illness benefit.
• 1:03
  SPEAKER_00: That means some or all of your some assured will pay out if you're deemed as terminally ill with 12 months or less to live.
• 1:13
  SPEAKER_00: Now, why I wanted to talk about that subject and to provide clarity to people is when you're having the conversation around how much life insurance is suited to my to your situation, it's important to consider a terminal illness fund.
• 1:29
  SPEAKER_00: So let's say, for example, John over here needs a million dollars life insurance because he has a$700,000 mortgage.
• 1:37
  SPEAKER_00: He wants to leave$200,000 to his kids, his four kids for education, he wants to pay for university, purely just an illustration for the exercise.
• 1:49
  SPEAKER_00: And then he wants a$100k emergency fund for well, let's say it's to pay off another loan, million-dollar life insurance policy.
• 1:58
  SPEAKER_00: Then he if John was to to die or to get us suffer a major illness, a terminal illness, sorry, we had 12 months or less to live, that million dollars, depending on the provider, would pay out in advance.
• 2:11
  SPEAKER_00: Now, depending on what John's dealing with, he might need to use that for treatment.
• 2:15
  SPEAKER_01: And he may survive.
• 2:17
  SPEAKER_00: He may survive, he may he may need it for care, home care, he may need it to decide he doesn't want to work for him and his partner.
• 2:27
  SPEAKER_00: That's the question I ask.
• 2:29
  SPEAKER_00: If you have a terminal illness, do you want to continue to work?
• 2:31
  SPEAKER_00: I never assume the answer is no, because a lot of people have proved me wrong and said they'll work right up until they're able.
• 2:39
  SPEAKER_00: But for most people I talk with, they don't want to have the they want the ability to not have to work because priorities change, right?
• 2:44
  SPEAKER_00: I want to go travel.
• 2:45
  SPEAKER_00: Exactly.
• 2:46
  SPEAKER_00: But if you're able, yeah, then the next question goes, well, do you want your partner or wife or husband to not have to work?
• 2:52
  SPEAKER_00: And most people say in a perfect world that would be great.
• 2:55
  SPEAKER_00: So as you can see, all of a sudden there's going to be costs involved there.
• 2:58
  SPEAKER_00: So I often find a starting point, depending on your situation, is what's your household income?
• 3:04
  SPEAKER_00: Let's use that potentially as a terminal illness fund.
• 3:07
  SPEAKER_00: So therefore, if the worst happens, you're terminally ill, you get paid out that John gets paid out the million dollars.
• 3:13
  SPEAKER_00: If he has 1.2 million, that 200k might be the household income.
• 3:19
  SPEAKER_00: They use that for that last year.
• 3:21
  SPEAKER_00: And then when John does go, there's still money to clear his 700k mortgage, his 100k loan, and the income support or the university fees for his kids in this example.
• 3:34
  SPEAKER_01: Can I ask something?
• 3:35
  SPEAKER_01: Sure.
• 3:36
  SPEAKER_01: A lot of people might get frightened if they suddenly have a million dollars in their account and they wouldn't know what to do with that.
• 3:42
  SPEAKER_01: Because obviously they would have forgotten the conversation they had with their advisor five years ago.
• 3:48
  SPEAKER_01: Is there a financial advice built in from the insurer when there's a big payout?
• 3:54
  SPEAKER_00: Depending on the insurance company, there's financial planning allocation to pay for it.
• 4:00
  SPEAKER_00: Because people do end up with a big lump sum, and it's to make sure they get it doesn't disappear.
• 4:05
  SPEAKER_00: Yeah, and look, this is just one example.
• 4:07
  SPEAKER_00: It might be someone that has a 300k life insurance policy because their risk is different, and that's tailored to their situation.
• 4:13
  SPEAKER_00: But the same thing happens if someone's terminally ill, they need they use all that money up in that last year.
• 4:18
  SPEAKER_00: Then when John's gone, Sarah can't clear that mortgage anymore or pay for the funeral because it's the life insurance ended up being used for terminal illness, which was uh different to what it was set up to be used for in the first place.
• 4:34
  SPEAKER_00: So it's just about having that conversation and giving people their education when they're taking out life insurance so they have adequate cover.
• 4:44
  SPEAKER_01: Okay, next question.
• 4:45
  SPEAKER_01: When they make that claim, how involved is the advisor?
• 4:49
  SPEAKER_01: It does the advisor get involved at all?
• 4:52
  SPEAKER_00: I think it depends on case to case.
• 4:54
  SPEAKER_00: For my clients, I'd 100% want to be involved.
• 4:58
  SPEAKER_00: Obviously, depending on the client and how they're grieving and how they want to deal with things.
• 5:03
  SPEAKER_00: Most people want the advisor to come in at this point because it takes less stress off them.
• 5:09
  SPEAKER_00: Having an advisor in your corner to fight claims or to get claims paid just takes that little bit of stress away from yourself.
• 5:16
  SPEAKER_00: You don't have to worry about who the insurer is, you can just have your advisor liaise or facilitate the claim on your behalf.
• 5:23
  SPEAKER_00: So to help deal uh what it sorry, in terms what that means is you can concentrate on grieving rather than having to deal with is my insurance gonna pay on top of it.
• 5:35
  SPEAKER_01: Because I feel like this is where a lot of clients don't realize that the advisor is here for the journey.
• 5:41
  SPEAKER_01: Like it's great and exciting when we put it in place for them because we can sleep better at night, but they don't realize we're here for the whole journey.
• 5:48
  SPEAKER_00: Yep, that's correct.
• 5:50
  SPEAKER_01: So it's super important to choose the advisor you like and trust.
• 5:54
  SPEAKER_00: It is, and it's also and if you don't hear from your advisor every year, it doesn't mean they're not there.
• 6:01
  SPEAKER_00: I mean, most people don't want to hear from their insurance advisor, their mortgage broker, their banker every year anyway.
• 6:07
  SPEAKER_01: We only hear from them when when something goes sideways or when they need something.
• 6:11
  SPEAKER_00: But that but that's also and that's why you're there, right?
• 6:14
  SPEAKER_00: So if you've had have a good relationship with your advisors, whatever the financial service is, and you had good experience to set things up, make sure you go back to them when you need to review or if you have questions, whatever it is, that that's our job is to help service your needs while you have these policies or loans in place.
• 6:36
  SPEAKER_00: Don't be too scared to get in touch.
• 6:43
  SPEAKER_01: And I'm like, then there's a silence.
• 6:44
  SPEAKER_01: I thought he was still talking.
• 6:47
  SPEAKER_00: No, no, that was a full stop.
• 6:49
  SPEAKER_00: Okay, sorry, Blake.
• 6:50
  SPEAKER_00: Sorry.
• 6:50
  SPEAKER_00: I should punctuate better than you.
• 6:52
  SPEAKER_01: I was I was so engrossed in your um discussion that I was waiting for more.
• 6:57
  SPEAKER_01: But you're right, like I think it's super, super important for people to realize that buying a policy online, ticking the boxes and getting it issued on the spot does not give you that peace of mind when this tough things happen in life.
• 7:09
  SPEAKER_01: Like when the tough things happen in life, this is when you truly need that support.
• 7:14
  SPEAKER_01: This is when you need your advisor by your side, holding your hand, making sure the paperwork is filled out, making sure the claim is paid out, fighting those battles for you because you're not going to be in that frame of mind to be dealing with that.
• 7:26
  SPEAKER_00: And I've touched on these other podcasts we've done earlier in the year.
• 7:31
  SPEAKER_00: You know, I've had claims where the client was declined due to non-disclosure.
• 7:36
  SPEAKER_00: And if I wasn't involved, I could never have got it.
• 7:39
  SPEAKER_00: I I got involved, sorry, obviously, because I was facilitating it and managed to get it overturned.
• 7:44
  SPEAKER_00: If you don't have an advisor in your corner with a good relationship, in that particular case, it would never have happened.
• 7:51
  SPEAKER_00: Insurers are pretty good at paying claims, it's a very competitive market, despite what people think.
• 7:56
  SPEAKER_00: They want to pay claims, so they have a strong claims rating.
• 8:00
  SPEAKER_00: But when they're curly and they sit on the fence, that's when your advisor can really come into bat for you because we know who to talk to, we have relationships with these companies, so it's important.
• 8:11
  SPEAKER_00: It's important to have an advisor.
• 8:13
  SPEAKER_01: Yeah, no, thank you so much, Blake.
• 8:15
  SPEAKER_01: Thank you for coming along and sharing your wisdom.
• 8:17
  SPEAKER_01: And I think we should do more of this and digging into real products because I think people don't understand how many products are out there and it can get so overwhelming.
• 8:28
  SPEAKER_00: There's a lot, there's a lot, even when I'm digging through policies, etc., it it's too much for even advisors to know every policy wording of a document.
• 8:37
  SPEAKER_00: But it's an advisor's job to understand the policy and what it does, but it's an advisor's job to find out what the policy covers if a claim arises.
• 8:45
  SPEAKER_01: Yeah, that's beautiful.
• 8:46
  SPEAKER_01: Thank you so much, Blake.
• 8:47
  SPEAKER_01: Bye.