(Provided with permission by Tower Life Ltd)
Things were looking up for Barb. It was nearly ten years since her husband Jim had passed away and she had put behind her the sudden loss and feelings of loneliness. She had thrown herself into her work as a jeweller as a way of dealing with grief and had built up a reasonable business along with John, her business partner. Barb was drawing a salary of approximately $100,000 per annum from the business.
Before Jim died they had made plans to take an extended world tour. The children had left home well before and the couple were looking forward to enjoying their new found freedom together. Jim's death had forced a reappraisal of those plans, Work became a welcome distraction and thoughts of increased recreation and travel were put on the backburner. Ten years on however, Barb felt she was ready to start taking things a little easier and to start making some travel plans.
Barb owned her home outright and was putting a good proportion of her income into savings. The share market had always been a bit of a hobby and over the years she built a solid portfolio. Between her home, share investments and strong income, Barb felt things were financially secure.
Another unexpected blow during a medical check up prior to her trip, Barb was advised to see a specialist about some numbness down one side of her face. After extensive testing she was diagnosed with multiple sclerosis. The disease progressed quickly and soon affected her fine motor skills, meaning within a few months of diagnosis she was unable to carry on in the business.
Her trip was put on hold once again, but that was the least of her worries. The business had to employ a contractor to perform her tasks and turnover plummeted. Unfortunately John was unable to buy Barb's share of the business. Barb decided to liquidate her shares, however the market did not return quite what she was hoping for.
While she was hopeful of not having to sell the house, some major modifications would be required to allow wheelchair access once her disease progressed. The cost was going to be in the tens of thousands -money she simply didn't have.
Within the space of a year her situation had turned from relatively comfortable to a financial disaster. Living expenses became a major concern and any thoughts of overseas travel or helping the kids were long forgotten.
What could Barb have done differently? A suggested personal insurance strategy for Barb prior to her diagnosis might have included:
An income protection plan of $6,250 per month with benefit payments to age 65. This would have enabled Barb to replace up to 75% of her income and would continue to pay her as long as she was unable to work, or supplement her income when working part time.
- A business expense plan which would reimburse up to 100% of fixed ongoing expenses of the business for up to one year.
- A critical illness plan would have paid a lump sum upon diagnosis of multiple sclerosis. This might have enabled Barb to continue with her travel plans and fund the necessary wheelchair access renovations to her home.
- A life insurance benefit would allow Barb to leave a significant bequest to her children and grandchildren, as well as paying out final expenses and funeral costs.
- Total and permanent disability insurance so that if Barb eventually became totally and permanently disabled she could afford a house keeper and private nursing services.
This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a financial adviser, whether the information is appropriate in light of your particular needs and circumstances.
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