(Provided with permission by Tower Life Ltd)
Brian and Jill thought it was finally their time to enjoy life. After raising three children, putting them through university and helping them leave home they could almost taste the freedom! Brian was running a successful business and was bringing home approximately $120,000 a year. They had almost paid off their home, they owned two cars and their bank balance was starting to look healthy for the first time in a long while.
Jill was planning a holiday in the Greek Islands and Brian had his eye on a new set of golf clubs. With a view to the future, they were considering some share options or even the possibility of a holiday home that they could rent out during winter.
Their daughter Gemma had recently become engaged and Brian and Jill were looking forward to giving her a wedding to remember. The other two children were already married and Brian joked about this being the last big expense of his child rearing career.
Suddenly all their plans were put on hold
One night Brian and Jill were driving home when Brian felt a sharp pain in his chest. On arrival at the hospital it was confirmed that he had suffered a major heart attack. Fortunately the close proximity to the hospital and the quick medical attention received saved Brian's life.
The following months were difficult. Brian's surgeon advised him to completely relieve stress which meant selling the business. The forced sale reduced the value of the business and all plans for holidays and golf clubs were cancelled. Brian and Jill were determined to still go through with the wedding plans but it would now take all of their savings to pay for it.
The sale of the business allowed them to payoff the last of their mortgage and Brian's superannuation payout meant they would probably have enough to survive, but any thoughts of leaving nest eggs or spending money on the pleasures of retired life had disappeared.
What could they have done differently?
A suggested personal insurance strategy for Brian prior to his heart attack might have included:
- An income protection plan of $7,500 per month for Brian with benefit payments to age 65. This would have enabled him to replace up to 75% of his income after the heart attack and would continue to pay him as long as he was unable to work, or supplement his 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 which would have paid a lump sum upon diagnosis of the heart attack. This might have enabled Brian and Jill to payout the mortgage, pay for the wedding and bring forward their trip to Greece, all without touching their savings.
- A life insurance benefit for Brian and Jill. This would allow Jill to payout the mortgage and invest any balance along with the business sale proceeds in the event of Brian's death, and Brian to hire a housekeeper and take some time off work in the event of Jill's death.
- Total and permanent disability insurance so that if either became permanently disabled they could payout the mortgage and afford the best available medical and rehabilitation resources.
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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