iRefi Insider School – The Biggest Risk Facing Investors Today


TRANSCRIPTION

The least sexy thing about property investing is probably one of the most important. Couple of friends and I were having a chat after one of my good friends got married on the weekend. And they both own property and they’ll ask me, “Hey, what’s sort of biggest risk you see at the moment for property investors?” And I said, “Look. Interest rates probably will go up at some stage. You know, you might have issues with yields. If even if you buy the wrong property or, you know, you’re not buying property quickly enough, your wealth might not grow at the speed that you want.”

But I said, “Look, probably the biggest risk is if you don’t have insurance. Or don’t have the right insurances.” So, what we do see when we talk to a lot of different property investors is some people have five, six, seven properties, but they don’t have life insurance. They don’t have all the different personal cover that, you know, is prudent to have, if you can afford it. And so, there’s no point in growing your wealth only for it to evaporate or to fall to pieces if you’re not around to look after it.

So, it’s not just a game of Monopoly when you’re building up a property portfolio. You’ve got to have things in place and people to help you if you have an accident, or have an illness, or an injury, or, you know, heaven forbid, you die before you had planned to die. Now, not many people die when they plan to, so especially, men that have heart attacks in their 50s and 60s.

You know, you might have mortgages and property plans that you maybe not have made as no one to your family and friends as you should have. And so, working with the proper lawyers and insurance advisers, you’ll get a bit more peace of mind and hopefully, sleep a little bit better because, one thing that we have learned over the last couple of years in doing a lot of mortgages is the insurance piece is incredibly important.

We used to do some insurance and refer insurance, but what we’ve done is actually partnered up with PIC Insurance. And they’ve got over 30,000 clients. They’re a New Zealand- owned company. They’re based in East Auckland. They do all insurances. And the reason I’d say picking them is the best idea, is because they have underwriting in house.

They’ve got very large partnerships with insurance companies that they send business to. They’ve got Berkshire Hathaway backing some of their products. If you don’t know who that is, it might not mean much, but that’s one of Warren Buffet’s companies. And so, sometimes, buying insurance through an insurance broker is a little bit more expensive than buying it direct.

So, you can get life insurance from Pinnacle Life online. It might even only take 10 minutes. The thing is, what you’re buying is very run of the mill, basic. And basically, those companies are not trying to pay out your policy if anything happens to you. They’re trying to protect their shareholders.

And when you work with an insurance adviser, or a broker, or a brokerage, what they’re doing is representing you. And if you need to file a claim for, you know, damages on your house, or an injury, or if your partner or family need to file a claim for your death, you want an insurance broker to be there, or a brokerage, to be that middleman to handle all the nitty-gritty stuff.

And so, what we say is that you’ve got to grow your portfolio even if that’s only just one house and protect it properly. And so, the test that you should have in place for your property portfolio, for your income, and if anything ever happens to you is the coma test. So, if you’re in a coma for six months or more, is the income going to keep flowing in?

Is your family going to be okay? And so, what you might need is if you’re not currently using property managers, provision to set that up. If you don’t have an insurance broker already looking after your insurances for your houses, for your life insurance, find an insurance broker that you trust. You can contact me andrew@irefi.co.nz, and I’ll link you up with the right insurance people at PIC.

Or, you know, everybody has a friend that does insurances. Get multiple quotes. Don’t be afraid. And don’t just get life insurance. That’s like a big mistake. A lot of people have injuries, and illnesses, and sicknesses, and income breaks that they weren’t expecting. And so, there’s actually a lot out there in terms of insurance products that, you know, might seem like, you know, 20 bucks a month, or a week, or whatever.

You’re like, “Oh, why would I do that?” But, you know, I have even seen people in my family, they’ve been injured, and then the income keeps coming and they don’t stress about getting back to work. They can focus on getting their injuries all healed up and then back to work when they’re ready. Yeah. Like I said before, use a broker. The reason you want to use a broker is because that broker is going to be trying really hard to make sure your claim gets paid.

If you’re working direct with the company, they’re going to be putting things into their policy documents that help them pay less, less often. And so, by working with a broker, somebody, hopefully, that you trust, when the time comes, you, or your partner, or your family members are going to be working with the broker that’s going to get you the claim.

And hopefully, a lot quicker. And basically, the way that I do it is my insurances are just paid at the same time as my mortgages. I just have it on auto like AP. It comes out of my mortgage accounts. I don’t even think about it that much. It just gets renewed each year. I’ve just switched over to PIC myself.

I was with TOWER Insurance. And, you know, the pricing was actually better through PIC than it was with TOWER this time around. And I set it up. I just paid the annual premium with a slightly higher excess. It doesn’t bother me to pay a slightly higher excess to reduce that premium amount. That suits my lifestyle. And it was just such an easy thing and I don’t really think about it that much anymore.

It just goes out with my mortgage usually, some of my other insurances. They do provide monthly repayment options as well. So, you know, grow your portfolio but don’t ignore, you know, the 1% of protecting things that’s going to make the big difference. And you know, we’ve seen the worst case scenario with people who have had these big portfolios and then the family sell everything off at a fire-sale pace, at discounted rates, and you know, it’s a terrible disaster.

And if you were around to see it, you would be, you know, disappointed. So, let us know if you need more information about it.