The True Value Of Life Insurance – A Case Study

By Author: nicksmith
Total Articles: 993
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Robert (aged 27) and Mia (aged 26) are a young married couple with two cute kids aged 4 and 2. Robert now has a good job as an Engineer and earns about $100,000 per year after having worked his way up the company. Mia does not have an income as she is a mum looking after the kids. After a number of years saving they were able to buy their own house with a mortgage of $300,000.

Their mortgage broker asked us to contact them to discuss insurances. Amongst other things we recommended Life Insurance for both Robert and Mia for an amount that would pay off the mortgage and leave some money to assist the remaining parent to bring up the kids. Mia was quite keen but Robert was adamant neither of them needed cover. He said “we are in our 20’s, nothing will happen to us till we are old”. As good insurance advisors we did our best to give valid reasons why they needed the cover but Robert was pretty hard to convince. He was also concerned about the extra cost of insurance on top of their new mortgage.

Three months later we approached Mia again and suggested that she may wish to discuss this with Robert again. At the ...
... minimum we suggested she arrange cover on him (as the main income earner) but have her shown as the policy owner ie the person who would be protected and paid out the sum insured if something happened to Robert. She was still very worried that if something happened to Robert they would be financially devastated. Three days later she faxed through the application form for Robert with a note to us that said ‘I told him to sign it as I didn’t want to be left in the ‘xxxxx’ if anything were to happen to him!

About 11 months later we received a very sad call. It was Mia, she said Robert had been killed in a motor vehicle accident about 2 weeks earlier. Apparently a drunk driver had lost control and swerved on to the other side where Robert was approaching in his car. Mia, trying to remain strong, asked for our assistance with a claim on the life insurance.

As the circumstances of death were quite clear from Police reports the claim was paid very quickly. Within only a couple of weeks we delivered Mia a cheque for $500,000. While, the money could never replace her husband she used the money to pay off her mortgage and then invested the remaining $200,000 so she could manage the family costs for the foreseeable future.

Only a couple of months later Mia visited our office with her 2 kids, she was carrying a giant hamper of goodies she wanted to give us in thanks. She knew that if the insurance had never been purchased she would have had to sell her house, would then have struggled to pay any rent with no real income and faced many long years of financial hardship.

This story highlights the absolute need to have life insurance, especially where you have a partner, dependent children or major debt such as a mortgage. And, just as importantly it does not matter whether you are a fit 27 year old or any other age. Also, sometimes a nagging Insurance Broker is a good thing!

For more information about Medical Insurance, please visit www.insurancehelpline.co.nz