Case Studies

Case study 1

Fiona is a 47-year-old who has been living with multiple sclerosis (MS) for about a decade.
When Fiona was 29 she and her husband James saw a financial adviser to organise their n investments, and each took out $1.5m life and TPD cover and $500,000 stand-alone trauma insurance. At around this time they also took out a substantial mortgage to buy their first house.
As an executive in the finance industry earning in excess of $100,000pa, Sandra worked long hours and traveled regularly.
Shortly after a promotion to a senior post in her thirties, Fiona was diagnosed with MS, a chronic, inflammatory disease that affects the central nervous system and is mostly diagnosed in women between 20 and 40 years old. A keen athlete, she noticed weakness in her legs, which led to the diagnosis of this unpredictable illness.
Fiona's diagnosis meant that she immediately wanted to reduce her working hours and level of responsibility to concentrate on her health and at the same time she recognised that if or when, the disease progressed that she would need to make further lifestyle adjustments. With the help of her financial adviser Fiona submitted a claim under her stand-alone trauma policy and received the full benefit of $500,000 as the insurer's definition paid full benefit on diagnosis and not on assessment of her physical capabilities.
The trauma benefit payment, made upon diagnosis, enabled Fiona and James to alter their lifestyle to cope with this potentially debilitating disease.
Fiona resigned from her job and used the lump sum to pay off some of the mortgage, added a home office where she worked as a part-time consultant and invested some of the payment to cover future expected medical expenses.
After six years of living with MS Fiona's health had worsened and she was no longer able to work as a consultant. With the help of her financial adviser a claim was submitted for TPD and was successful based on the fact that due to her medical condition she was no longer able to work in her usual occupation. The $1.5m payment was used for modifications to the family home to allow Fiona to continue living there. An amount was invested for future medical costs. James was also able to take six months off work to help them at this difficult time.
Fiona's symptoms increased in severity over the next few years and her mobility became impaired. Fiona and James agreed she would need to move into full time care. The funds that had been invested from her TPD claim two years earlier were vital in helping make that decision. Facilities for young Australians with long-term 'high care' needs are costly and rare. Fortunately, with the payment James was able to secure a place for Fiona in suitable accommodation, and ensure Fiona had the 24/7 care she required on an ongoing basis.
Due to of the severity of her condition, Fiona was also able to access her super savings as a lump sum. Combined with the money invested from their TPD payment, Fiona and James used this to purchase a second property - an apartment for James closer to where Fiona was being cared for. As well as moving nearby, the financial flexibility allowed James to take an extended leave of absence from work over the transitional period into full time care.
This financial security achieved by insuring themselves correctly meant they were not forced to sell their family home. James now lives within walking distance and visits Fiona every day.

Case study 2

John is employed by CTC, a software company as the principal salesman of the business. John has built up a reputation with several key clients and is responsible for over 85% of the business profit each year.
In the event of John's death or disability, the business will face significant financial difficulties. For this reason, they could insure John for any of the following events:
•    Death
•    Total and permanent disability (TPD)
•    Terminal illness benefit; and/or
•    Trauma
The purpose of the insurance is to replace lost revenue so business expenses can continue to be paid while a replacement is found and trained. It can also cover the recruitment and training costs. CTC is the policy owner and claims a tax deduction for the premiums. If a claim is paid, the proceeds will be included in the business' assessable income for that financial year.
The insurance cover allows the business to continue running should something happen to John. In the instance that John won't return to work in the future, the company can use the claim proceeds to employ and train another salesman and rebuild client contacts.
Without the key person insurance, the business risks financially losing a substantial amount of revenue and could potentially become insolvent.

Case Study 3

David, 35 year old, married with 2 children, earning $60,000 income as an accountant. David’s wife Sarah (34) is currently at home looking after the two young kids Billy (4) and Zac (2). David’s family has the following debts, Mortgage $140,000, Credit Cards $4,000 Car loan $6,000.

David also had $50,000 life insurance cover provided under his superannuation policy

David was concerned about what would happen to the lifestyle of him and his family if he died or was to suffer an accident or illness that prevented him from working.

David selected $1,000,000 life insurance and $200,000 Trauma and Total and Permanent Disability insurance cover in addition to the life insurance provided under his superannuation cover. This combination of insurance cover (under super and standalone insurance) would deal with all of the family debts and provide the family with $900,000 to live off should he die. If David was to suffer a one of the medical conditions specified in his Trauma Insurance policy or suffer a total and permanent disability it may help meet the medical costs associated with the treatment of the condition without the need of having to dip into any personal savings or going further into debt.

David also considered the need to provide life insurance cover for his wife Sarah. Although she was not working, she was making a valuable contribution to the running of the house and looking after the children. David and Sarah decided to cover her life for $500,000 so as to help towards providing external helpers if Sarah was not around to look after the children. He included $400,000 trauma and total and permanent disability cover on her life.

David recently read about children who suffered serious illness and the associated costs in treating these illnesses. As a result he included his two children for $50,000 each for child’s trauma insurance as part of his own Life insurance policy to help towards such costs.

David was also concerned if he should suffer an illness that prevented him from working he also chose to protect his Income with income protection insurance up to the maximum possible 75% of the current income. David’s employer provides for sick leave up to 3 months and without employment with his accountancy firm, David had no other income to rely on. David decided to choose $3,750 monthly benefit for his Income Protection cover (being 75% of his income, the maximum level of cover offered under Income Protection) with the benefits paid through to his 65th birthday. Despite his currently employer offering up to three months sick leave, David thought that it was likely that he would be changing employers and knew that most companies offered just 4 weeks sick leave. For that reason he chose a one month waiting period on his policy. David also chose to include an increasing claim benefit option on his Income protection policy, which if he was on claim the monthly benefits would increase to help keep up with inflation.

Although David assumed his income will increase over time he chose a level premium option. Level premiums are slightly more expensive than stepped premiums in the first few years of the policy, however over the term of the policy as the longer term savings of level premiums typically far outweighed the short term savings of stepped premiums.

Case Study 1: Diagnosed with Multiple Sclerosis

Case Study 2: Insurance for death and disability

Case Study 3: Life insurance