A Tale Of Two Insurance Stories!

 

We have all seen movies on TV where there are two different endings to a story.  It is usually a family ghost or an angel from heaven that has been sent to show a person the consequences of their decisions in life!

There is a happy ending & a not so happy ending with the person having a second chance to go back & make things right.

This of course is make believe as in real life we sometimes only get one chance to get things right.  For some people they don’t even get this chance as an unexpected event occurs which leads to grief.

This is particularly true in relation to life insurance!

Here are two stories outlining a family scenario below, highlighting the financial impact both with & without adequate Life insurance cover!

As they also say in the movies, “the following story is based on true events”.

So we have David, the father, husband & sole income earner of the house.  He is married to Jane who is a stay at home mum who primarily looks after the children.

They have two kids, Grace who is 10 & Max who is 8.  David is a project manager in the construction industry earning $130,000 per year.

Their home is worth about $500,000 with a mortgage of $350,000.  Their only other major debt is a car loan of about $40,000.  Both of their children attend a good private school with combined yearly fees of about $20,000.

This is a very common family scenario that I come across quite often & one that may even resemble your situation.

Tragedy strikes as David suffers a major heart attack unexpectedly!  He makes it to the hospital in time however dies shortly after as the surgeons are unable to help him.

This is what follows for David’s family without any life insurance in place!

Following the shock & emotional pain of David’s death, Jane now needs to figure out how the family will survive financially.

The first thing that needs to occur is the sale of the family home.  Without an income it is impossible to meet their regular loan repayments.

Jane requires financial assistance from her parents until the house is sold several months after David’s death.

After the mortgage & car loan are paid off along with some smaller debts, Jane is left with approximately $100,000 in total.  She is renting a small unit with her children until she is in a position to buy a house again.

Jane is only 35 years old so $100,000 will only meet her financial commitments for a couple of years.  Like most people she didn’t expect her husband to pass away at the age of 40!

Jane has no choice but to return to full time work.  She shouldn’t have a problem finding work as an accountant as this was her profession before she became a mum, however who will look after the children?

Even though she is now earning an income she didn’t anticipate the extra costs involved with before & after school care including school holiday care.

These costs are slowly eating into her budget so she decides to temporarily pull the children out of private school.  The children are not happy that they are changing schools & leaving their friends however financially she has no choice.

Even though all of her plans were supposed to be temporary she continues to live from pay to pay for many years to come.  She was also unable to send her children back to private school as the school fees continued to increase each year, making it impossible financially.

They do have their health however David’s death caused a considerable change in lifestyle that they could not have envisaged!

Let’s see what may have happened if David had adequate life insurance in place!

Jane & the children still experience the shock & emotional pain of David’s death.  This however is where the similarities end.

David & Jane were wise enough to approach a financial adviser several years earlier to discuss their personal insurance needs.

After one appointment & an affordable yearly premium of $1,100, adequate life insurance was recommended & implemented by their adviser.

The adviser had factored in the elimination of all debt & an ongoing income stream for Jane & the children until Max’s 21st Birthday.  Several weeks after the funeral Jane was able to pay off the mortgage & now owns her home freehold!

Jane wants to be there for her children until they are old enough to look after themselves, so she never intended on working again until she was much older.

Her lump sum life insurance payment will be reinvested & allows her to draw an income of up to $100,000 per year in order to meet her financial commitments & maintain her standard of living.

The adviser had factored in a lump sum payment to replace approximately 75% of David’s income until she is ready to re enter the workforce.

More importantly her children are able to remain at their school & continue to receive private education up until year 12, as David & Jane always wished.

Even though Jane has lost her husband & the children have lost their father, their lifestyle & standard of living have not been affected by his death.

My goal as an adviser is to ensure that all of my clients have adequate cover in place in order to avoid the first scenario.

Don’t underestimate the difference a one hour appointment with your adviser can make on your life!

You have the choice today to decide on which story you prefer to live so please do something about it!

 

 

Tom George
My role as a Life Risk Adviser involves educating, assisting and providing advice in the area of personal insurance. Follow me on Twitter | Linked In Profile

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