Your Money and careers writer for the NZ Herald

Diana Clement: Givealittle becoming the new life insurance?

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Givealittle has become a defacto safety net for some in our community. No insurance? Turn to Givealittle for financial support.  Photo / Givealittle
Givealittle has become a defacto safety net for some in our community. No insurance? Turn to Givealittle for financial support. Photo / Givealittle

Givealittle is not a replacement for life insurance.

The charity website we love to give to is overflowing with good causes. It's helping many a Kiwi fund treatment, funerals, or simply living costs when a personal disaster strikes.

The question of whether Givealittle is turning into a replacement for life and medical insurance has interested me for a while. Articulating it in public, however, is a good way to make myself public enemy number one.

Yet Givealittle has become a defacto safety net for some in our community. No insurance? Turn to Givealittle for financial support.

Each individual case is heart wrenching and every day around 780 people reach into their pockets and give $67 on average each to a cause. On Monday of this week all but one of the top ten "trending" causes by number of donations on Givealittle were personal causes of which the most common was cancer.

But isn't that what we buy insurance for? The words "no insurance" are all too common among causes on Givealittle. I was left wondering if Kiwis think there's no need to save for rainy days or insure themselves anymore because the public will pay for the treatment they need through Givealittle.

In almost all most cases life, income protection, trauma and/or basic health insurance would have paid for the care or income replacement needed.

But isn't that what we buy insurance for? The words "no insurance" are all too common among causes on Givealittle.

Blair Vernon, director of advice and sales at AMP put it far more eloquently than I could. The Givealittle effect is something he discusses with AMP's life insurance salespeople.

He views insurance as the pooling of money before the fact, and crowd funding such as Givealittle as pooling of money in arrears. By that he means that when you and I buy insurance we are pooling a sum of money each month in case we need a larger sum at a later date when we fall ill or die.

Those who don't do this in advance are getting the same outcome by appealing to the goodness of others on Givealittle. Instead of paying for insurance they are choosing to spend their money in other ways and then ask for charity when illness, accident or death befalls the breadwinner.

Another issue pointed out to me by Vernon is that the appeals on Givealittle by people who could have obtained the money they needed from an insurance policy are crowding out other good causes such as appeals for research funding.

Of course some people who don't have insurance simply can't afford it. The majority, however, choose not to afford it.

It's true. Several years ago Spark's PR department decided cleverly to send Givealittle credit to journalists instead of Christmas cards.

It was an interesting exercise and I gave my donation to someone's personal cause rather than the many research appeals such as those from the NZ Institute for Rare Disease Research or the NZ Multiple Sclerosis Research Trust.

Of course some people who don't have insurance simply can't afford it. The majority, however, choose not to afford it. They don't think about the cost of the "what ifs". If your other half dies slowly there's a good chance you'll need to take time off work - sometimes months - and may not be able to return full time if you have children.

Insurance would have covered this and you'd know how much you would get in advance rather than relying on crossed fingers.

Perhaps I'm swallowing the insurers' line and Givealittle is the way of the future. Save money on insurance and when you need help, the New Zealand public clubs together to sort you out of the proverbial in the way whānau may have in the past or traditional fundraising.

Yet the more I ruminate on the subject of Givealittle the more I think that no-one should have to beg to strangers to survive financially or get medical treatment

Life insurance is more than just a lump sum of money.These days most policies will pay out immediately if you're diagnosed with a terminal illness. That money can then be used to cover living expenses and whatever health care you choose, whether or not it's covered by Pharmac.

Some policies such as Sovereign's TotalCareMax also offer a sum of money for the funeral, which avoids the need to go cap in hand to Givealittle.

Another insurance that does the trick when large sums of money are needed is "trauma" cover. That's a lump sum that is paid out if you're diagnosed with certain listed illnesses such as cancer or heart disease.

The third Givealittle avoidance insurance is income/mortgage protection, which covers you for a weekly amount to cover your income or mortgage if you can't work due to illness.

And Southern Cross style health insurance helps you skip the queues for the type of healthcare provided by the state.

People really need to get advice about their insurances. I noticed a couple of recent appeals on Givealittle where the people had cancelled their insurance because they'd fallen ill and couldn't afford the premiums. Yet a good life insurance policy has waiver of premium cover, says Conor Sligo, general manager at LifeDirect.

Instead of paying for insurance they are choosing to spend their money in other ways and then ask for charity when illness, accident or death befalls the breadwinner.

I also noted that some of the appeals on Givealittle would have been covered by travel insurance. If you can afford the flight to Vietnam or Chile, you can afford travel insurance.

One of the biggest fundraisers in 2015 on Givealittle was Paul (PJ) Lupi's. Supporters gave $173,147.21 to bring Lupi back to New Zealand after a scooter accident in Thailand.

A $100 to $200 travel insurance policy would have covered him - although I do have to say that it's important to read the fine print. I checked out 1Cover and a motorcycle accident would be covered providing you (or the rider if you're the pillion passenger) have a current New Zealand motorcycle licence. Other policies may exclude such cover.

A Southern Cross survey released this week found that 91 per cent of Kiwis were aware that other countries didn't offer free health care to travellers and only 20 per cent thought it was acceptable to ask for money through public funding such as Givealittle if something goes wrong whilst overseas.

Givealittle is especially popular for individuals who need medicines and treatments that the public health system and/or health insurance won't pay for. Neither will usually pay for experimental, unfunded and alternative treatments.

Many such cases reach the headlines. Melanoma drug Keytruda (Pembrolizumab) is one medicine that isn't funded by the public health system in New Zealand, and shows up in Givealittle campaigns because Pharmac doesn't cover it.

Nor typically do private health insurers pay for non Pharmac medicines. These insurers may also limit the amount paid for overseas treatment.

Another issue pointed out to me by Vernon is that the appeals on Givealittle by people who could have obtained the money they needed from an insurance policy are crowding out other good causes such as appeals for research funding.

Several recent appeals have been for travel by cancer patients to the Brio clinic in Thailand for alternative treatment. Although health insurance wouldn't cover this or non-Pharmac medicines, a trauma policy would. The lump sum pay-out can be spent as the person chooses.

One group of people which may fall through the cracks of insurance are those born with genetic defects. In the case of someone with a heart defect, for example, it can be difficult or extremely expensive to get cover for anything heart related because "pre-existing conditions" are excluded from most health related policies.

The public health system should provide treatment, but there may be no insurance pay out to cover a spouse who needs to give up work, for your lost income, or for funeral costs.

Finally, whatever the pros and cons of Givealittle don't stop giving a little to good causes. But make sure you're not the next person looking for money. Take out insurance.

- NZ Herald

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Your Money and careers writer for the NZ Herald

Diana Clement is a freelance journalist who writes about personal finance and careers. She has worked as a journalist for more than 25 years in both New Zealand and the UK. Diana has contributed to a large number of local and international publications. Her pet topic is the secrets of saving money.

Read more by Diana Clement

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