Page 80 - Smart Money

Chapter 4

Case Study (cont.)
Another recent example happened to a husband and wife. They had
a five-year plan to build their super and get to the point where they
could retire. The husband was diagnosed with a terminal disease two
years in, so he was not going to get to the point where he could retire.
But because it was a terminal illness, we were able to claim on his death,
even though he was not yet deceased. We have established everything
now, so that even though it is inevitable that he is going to pass away
this year, his wife is already set up and doesn’t have to stress or panic
from a financial perspective. It is all up and running and ready to go.

I had been meeting with this couple every year and as part of our
discussions we would review his insurance needs. Because it was
costing over a $1,000 a year, we would always ask, ‘Do we still need this
cover?’ The response was always, ‘Well, from a financial perspective, are
we at the point where we could retire if something went wrong now?’
and each year we said no. So we kept the cover and didn’t cancel it, and
again, that was the difference between the wife having a comfortable
retirement and not. Obviously it is still going to be a stressful and
horrible year, but her financial situation is catered to.

One of the things we get told quite frequently is, “I can’t afford insurance
premiums,” and our response is usually to point out that if you can’t
afford the premiums now, how could you afford your debt repayments
without a salary? Who pays the bills if you can’t? For how long? How
many sick days do you have currently with your employer? Ask yourself
the question, does my employer love me enough to continue to employ
me and pay me for three months after I physically can’t work for them?
And what about six months? And what about 12 months? Generally, most
employers will look after you for a month, maybe two, but after that you
are on your own.

And think about this: what becomes of the home when the breadwinner
dies? That is another very important question. If the breadwinner is the
person repaying the loan and they are removed from the picture and the
mortgage is still there, what becomes of the home? Will the survivor have

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