This is a question often asked by clients, especially those with medical insurance.

Inflation loosely termed is the change in buying power $1 has today vs. a point in time in the past. The Reserve Bank is under instruction from the government to keep this in a band between 1% and 3% per annum.

The best lever for the Reserve Bank to use to manage this is the interest rate, which is why it gets a lot of focus.

Inflation rates help drive the decisions the Reserve Bank makes on interest rates. (In a very simplified way)

What does this really mean?

Let us start with what is BMI?

BMI stands for Body Mass Index. It is a medical tool used by the medical profession to assess someone's approximate body fat.

• BMI is a function of a person's height and weight. Doctors often use this in conjunction with a person’s waist measurement to get a more accurate understanding of how healthy a person's weight is.

I am guessing you would not be too happy to have your financial adviser measure you for your insurance application, so insurance companies only use height and weight.

Good question as most people struggle with an example of a disability that is not a trauma or an accident. A degenerative back condition is one, no event as such so not ACC. Though there is another, I have seen which was more surprising.

Who would have thought a change in regular management medication would result in not being able to work? Well it can happen, not only once but a recent clients father has had a similar experience too and the similarities are quite surprising. Let’s just call them both Peter.

Something which is often kicked around by financial advisers is private education, sort of meaning: if something happened to you, your kids would go/move to private education from public education.

Now this may be a wish you have but the practical reality is your kids have had a significant change with the loss or disability of a parent. Why would you inflict more change on them by pulling them away from their friends and stable routine to send them to private schooling? Sounds like a great way of scarring them for life at a vulnerable time.

One simple reason; your risk situation changes. Surprisingly so. I have found many situations where what was covered and covered reasonably well, is not only months later.

For example, a new client I was talking to had a cover that was only a few months old. The situation had changed quite quickly following a relationship break up, quite a bit of debt had been taken on as a result. The life cover taken was no longer sufficient to cover this and the repayment insurance they had, now has a significant shortfall.

Another client after reviewing their situation, a month later comes back. Oh yes, by the way, we have bought an investment property and effectively doubled our mortgage. Quite a change in risk there too.

Life’s full of surprises though life cover insurance is usually a subject you do not get surprises in. Sovereign’s 2013 published causes for life claims, or rather reasons people died, makes for surprising reading.

In the graph from Sovereigns claims for the year ending 30 June 2013, The 70 plus age group isn’t surprising, cancer, heart or lungs are usual reasons people pass away. The first usually causing one of the second or third.

Stepping back from the older lives, things get a little different.