Insurance for 35 - 50s

Case study: Family protection

Paul is aged 35, married with two children and employed as a sales representative with a pharmaceutical company. His financial plan is based around a portfolio of managed funds, direct shares and an investment property.

His debt includes a $95,000 mortgage on his home with a current repayment of $700 per month. His investment portfolio is geared with an interest-only loan of $180,000.

The repayments are $970 per month with income covering $770 per month and an out-of-pocket shortfall of $200 per month.

In the event that Paul suffers a serious traumatic event, he feels that he would not be required to extinguish his debt, but acknowledges concern regarding serviceability.

He appreciates that his income protection policy will not cover periods of voluntary absence from work that may be necessary. In the event of a medical trauma, Paul and his family do not want to worry about the finances required to maintain the borrowings for the home and investments.

With this information it is anticipated that if Paul were to suffer a trauma, he may incur the following expenses:

  • maintenance of household expenditure ($1,000 per month) and monthly debt serviceability ($900) for a period of 12 months. The lump sum to provide for this is estimated to be $22,800
  • costs for nursing care for a period of six months is estimated at $40,000
  • costs for out-of-pocket medical expenses estimated at $50,000

The total required benefit is therefore $112,800.

In the event that Paul wishes to extinguish the total of all debts, the sum insured would be considerably more. In his case the sum of all debts, cost of nursing care, regular household expenditure and out-of- pocket medical expenses would total $265,000.

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