Know Your Money with Bronwyn Waner and Craig Finch
Know Your Money with Bronwyn Waner and Craig Finch
152. Money Talks: Brightrock's Premium Settlement Options
What happens to your life insurance when you retire? Most people face a difficult choice between continuing to pay steep premiums or abandoning coverage they've funded for decades. Sean Hanlon, Executive Director at Bright Rock, reveals a game-changing alternative.
The premium settlement option stands out as Bright Rock's signature offering. Unlike competitors who limit this benefit to age 65, Bright Rock allows clients to activate it from age 55, provided they've paid premiums for 15 years. This means you can stop paying premiums while your coverage remains intact—a crucial advantage when pension funding becomes your priority and rising insurance costs become burdensome.
Beyond this cornerstone feature, Hanlon unpacks several innovative benefits that redefine traditional insurance approaches. The pre-funded funding pattern allows clients (particularly business owners and farmers) to pay slightly higher premiums initially while enjoying level payments and 4% annual coverage growth. This creates predictable cash flow and significant long-term savings—millions of rands over a lifetime.
Perhaps most revolutionary is Bright Rock's underwriting approach. When you take out a policy, you're underwritten in bands of R10 million, giving you access to additional coverage without further medical underwriting. This proves invaluable when circumstances change, such as when business opportunities require increased loan facilities, and your health might have changed. Even more remarkable, the "change moment payout" feature provides income for 10 years after retirement, functioning as a pension booster that pays out even if you've previously claimed on your income protection policy.
Whether you're planning for retirement, structuring business insurance, or ensuring fair inheritance between children with different career paths, these features offer unprecedented flexibility. Listen now to discover how these innovations might transform your financial planning approach. Have you considered how your insurance needs will change in retirement?
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Hello everybody. Welcome to Know Your Money. I'm Branwan Wayner.
SPEAKER_03:And I'm Craig Finch, and we are from Growth Financial Planning. We hope you enjoy our podcast. Welcome everybody. Sean Handon from Bright Rock, Executive Director. Thank you for your time once again.
SPEAKER_02:Thank you, Craig.
SPEAKER_03:And we were chatting about there's some unique parts of your product that at age 65 cover can continue without paying premium. Is that correct? That's correct. Okay. Explain that to us.
SPEAKER_02:Sure, Craig. Thank you for asking the question. It's called the premium settlement option. So with uh there are two other companies that offer it, and and uh don't ask me that I'm not gonna market for them. Okay. But uh but ours is quite quite unique, okay, in that uh you with, for example, the other two companies you have to take out the policy at 65. With us, it can be from age 55, as long as you've been paying premiums for 15 years, because obviously it's pre-funding. So, in other words, we're funding the ability to be able to not pay premiums but continue your cover when you're older, which makes a lot of sense, right? Because if I'm older, you know, my my big focus there is on my pension funding. So paying my life assurance policy, okay, is actually um and especially one that that that's premium is compounding away, becomes quite onerous when you're older. So you effectively are paying a higher premium during your younger working years. Um and for us from age 55 onwards, okay, if you if you uh then retire and your premium settlement option kicks in, your cover remains then level at whatever it's grown to at that point, but you then stop paying premiums.
SPEAKER_03:So can you retire early at 58 or whatever? You don't have to be 65. No, you can you can whatever day you choose.
SPEAKER_00:Well, you can stop that premium from the age of 55. It doesn't have to be at 65.
SPEAKER_03:Good. Okay.
SPEAKER_02:As long as you've paid for 15 years.
SPEAKER_03:Because that's always price. So yeah, yeah. So that's a great option because a lot of clients in retirement have this life policy and they go, What am I going to do with it? Why should I lose it if I pass away? My children could get it. Yes. But now somebody's got to pay for it. So the kids start paying and they think, well, I hope dad doesn't die, but it'd be quite nice maybe if he does die. Because I get all this money. So I sort of get that impression on a regular basis in my house. But but so this takes that out of the equation completely. At at a determined, let's say at age 60, you stop paying premiums and your cover continues. Does that include severe illness? Uh yes, that does.
SPEAKER_02:Okay. One of the things that I also want to talk about, if I if I may just grab the opportunity, is we've spoken in previous uh uh series about um funding patterns. Okay, and and we we take great pride in letting people understand what a funding pattern is. Because for example, what if I what if I'm a uh a farmer, as an example, it's a big, very big seller for us, and I've got two children, okay? The one child is gonna take over the farm, she will she wants to farm.
SPEAKER_00:The other child's a she. Well done.
SPEAKER_02:Yeah, the other child, he's gonna go play music in London. Okay. All right. Um, and I'm the farmer. So I want to be able to leave the musician, okay, the equivalent value of the farm. Okay. So I don't know, I I I don't know if you've got kids, but you try and treat them fairly, but sometimes very difficult. But uh the the reality is that we can take out what we call a pre-funded funding pattern, and that's where I can uh I can pay a higher amount of premium today, but my premium remains level, but my cover grows by 4%. Okay. So you're then pre-funding it, so you're paying 30-odd percent more for the next seven or eight years, but over the premium paying a lifetime, you're saving millions of rands.
SPEAKER_00:And also you're doing that while you are making that money. So you can actually afford to do that 30% a little bit higher now, and then have that benefit later on in 10 or 20 years.
SPEAKER_02:Right, right. And and for a business owner or a or a farmer as an example, having predictable cash flow, you know, is so important, but at the same time, their cover is growing. So that ability to be able to have funding patterns that can flex according to people's needs, okay, is also incredibly unique to Bright Rock. You know, other companies' funding patterns, people don't even really understand them. And and I've said it in previous uh uh sessions, you know, what will your premium increase be next? You go, I can't in my record of advice, uh, as an advisor, I can't put in there, okay, what it'll be because it's illustrated. You know, um so uh you can't with with good conscience say what it'll be. And that that goes back to previous uh sessions where I spoke about that certainty pillar, you know, in in in inside the product. Yeah. The other other thing that that that companies do is they they they talk to you about getting something back, okay? Um and often and often that's quite misleading, you know, um, because if I claim on the policy, which I which is by the way why I took out the policy, it's a risk policy, okay, it's not a pension planning policy. Okay, I can affect that cash back. Okay. Um we we've built into our income protection what we call a change moment powered. Okay. Um and that change moment power kicks in on your given uh retirement age when you now no longer need to protect your income. You've accrued an asset in your product that even if you've claimed on the product, the asset sits there and it pays you out, okay, um, an income amount over a 10-year period. Okay, an income amount, not a lump sum.
SPEAKER_01:How is that calculated?
SPEAKER_02:So we calculate it up front, it's actuarially calculated. Okay. And it's it's obviously built into your premium. Um, and it's in, as I said, it's automatically embedded inside your income protection policy. So not only are you paying uh less to protect your income, not only can you protect your income accurately, okay, you can predict how many paychecks you've got to protect, as we've discussed in previous series. But at the same time, if I get to that retirement age, okay, I've got an income, an income um, a pension booster that's that's paying me out an in an income amount for 10 years, okay, to supplement my retirement planning. Um and that and and that's incredible because it's not a cash back, okay, it's not. Okay, it's a change moment payout.
SPEAKER_00:So how I can describe it is let's say you've taken out that policy and sorry, what's the term called when you stop paying the premium?
SPEAKER_02:Your retirement date.
SPEAKER_00:No, um premium settlement option.
SPEAKER_02:Yes.
SPEAKER_00:Okay. So you've taken out your policy and you've chosen now your premium settlement option. So at age 65, you stop paying for that cover, but your cover pays it stays in place. And then you get this change in moment payout, which will give you, let's say, a thousand Rand a month. So you are really helping your retirements and ensuring that your beneficiaries can still get your life coverage. You're not now paying 10,000 Rand for a life policy that you can't afford. So it really does work well if you position that properly with the client. So, for example, if I am giving client cover, I would take out, say, two bright rock policies. So I would take out one that will go for life on certain things, and another one that will have that settlement option. Because the amount of cover a person needs when they are in their 40s and having four children is very different to the amounts of cover that they need then. But you do still want to give your beneficiaries something because you've paid all this money over time. So you really can work it well.
SPEAKER_01:With with people's income being dynamic throughout their career, um, is there like a review process? It would be underwriting again. So worrying. So let's say you go from being a 25-year-old to suddenly a CEO of a big company at 4550.
SPEAKER_02:So I I'm so so glad that you asked that question. Okay, because it talks to another extremely unique feature, okay, that we have in our product. Other companies have a similar feature, but they are watered down and are subject to. Okay. Um, and as I said, I'm not here to market for other companies. But the the the reality shouldn't. No, I won't. I did. The reality is that when we underwrite you, okay, because you ask a great question, yes? So let's just let's just talk about a business assurance need. Okay, so for example, I've got a contingent liability with a bank, okay? So I've got a 10 million rand loan, and the bank obviously wants uh collateral on that loan in the event of my death, okay, or disability. So I take out a life assurance policy. So if I go to any other life company, I'll buy a policy, okay, and they'll cost me to age 110. Okay. Not for 10 years. Okay. With Bright Rock, okay, you take it out for 10 years. Okay. So let's say it's 5 million Rand, as I as, for example, we underwrite you in bans of 10 million. So now let's say your premium is a thousand Rand and your benefits not going up because your your your your your loan facility is 10 million. Okay, it's not increasing. But now we come along and we go, you know what, we've got a a business opportunity that we want to take, okay? We want to increase that uh that uh liability, that loan, by another three million rand. Okay. But my blood pressure's increased, okay, because you you you you're running a business, okay? It increases. Okay. At the end of the day, we underwrite you in bans of 10 million. So I took out a policy for 5 million Rand, but I've got access to another 5 million Rand of medical underwriting free cover. So so because I've now got taken that loan from a 5 million Rand loan to an 8 million Rand loan, I can then go to Bright Rock and execute what we call the extra cover pipe of 3 million Rand free of medical underwriting. And that is unbelievably. Is that a one-time step or can you continually do that? You can continue to do it to do it up to that 10 million band. And if you take out 10 million in one rent, we underwrite you to 20 million, okay? Up to 30 million. Okay. And and and what we do now is is that we actually provide a facility for our advisors where we actually uh contact the clients, okay, on behalf of the advisor. We don't give advice, we just say, you have this facility available to you, would you like to take out more cover? Okay, and we've got a 70% take up rate. Very good. Where people where people take out their cover. And and and and I often say to uh to people that they go, oh no, you 5% uh uh cheaper or more expensive than a competitor. The first thing I do is look at the funding pattern. Okay, because they're not comparing apples with apples, okay? Right? Because if we say the policy goes up by 5%, it goes up by 5%. Yeah, it doesn't go up by 11. Okay. I mean, it was interesting the other day I was doing a presentation uh in L Sprate and I showed a competitor quote. I said, yeah, this policy says that my benefits go up, my my premium goes up by 5%, my benefits go up by 5%. Turn over the page. Absolutely, the benefits went from a million to a million and fifty. Okay, premium, turn over the page, illustrated 11%. Okay. So so you there's often a lot of the times misleading, okay, in terms of those those funding patterns. But when I get into a situation like that, if if the if we are slightly expensive, I say, but you need to go and add on another five million rand. Because you're not just buying five million and I'll cover with us, you're buying 10 million rands with a cover, but you're not paying for it today. You pay for it when you need it. Like when you need it, yeah. And it's an extremely powerful benefit. You give them access without having to go through the whole process or whatever. Spot on one. Absolutely great. That's good, yeah. Yeah.
SPEAKER_00:Awesome. Thank you, Shaw.
SPEAKER_03:Great benefits. Thanks for sharing it with us. Thanks, Greg. Thanks. Thank you very much. That was a good one. Thank you for listening. If you have enjoyed this podcast and would like to subscribe, please visit our website www.growth.co.za The information we have provided in this podcast is our personal opinion. For more detailed information, please discuss your financial situation with a financial planner.