Mike is married to his childhood sweetheart Robyn, they have a 2-year-old daughter Mia, and another baby on the way. They own their own home with a $400,000 mortgage, and Mike has a novated leave for a vehicle.

Mike has worked hard to try to set his young family up financially. He has gone to TAFE of an evening to improve his qualifications and has changed jobs a few times always with a view towards improving his career prospects (and his pay packet).

Despite this Mike and Robyn are finding it hard to make ends meet now Robyn is not working and needed to find a way to cut their expenses by $50 a week.

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Personal Finance Audit

Mike was seriously thinking about cancelling his income protection insurance to save a bit of money. The insurance provided cover of 75% of his income if he was unable to work due to illness or injury for more than 30 days and would continue to pay these benefits until Mike reached age 65 if he was unable to return to work.

Mike understood the importance of having this insurance but was having trouble finding other areas to cut expenses and if he let the policy go the $250 a month premium saved would solve their cash shortage each month. He was reluctant to do this though as his father had suffered a disability at an early age and he remembered how his parents always told him they would have struggled if it were not for the insurance.

Problem Solving

Before cancelling the policy, Mike asked us to have a look at his finances to see if we could find another way of solving his problem.

One of the by-products of changing jobs is Mike has ended up with three superannuation funds – a retail fund and two industry funds. Each of the industry super funds had a default level of insurance cover $180,000 each for Death and Total & Permanent Disability (TPD) and offered income protection cover as an option. Although it was available Mike had no insurance cover in the retail fund.

Recommendations

While reviewing Mike’s superannuation and insurance we recommended he

consolidate his super into one of his existing industry funds.

We helped him apply for income protection insurance with a 30-day waiting period and 2 year benefit payment period inside his remaining super fund.

increase the Death and TPD Insurance cover to $650,000 (enough to clear the mortgage and provide a lump sum to cover increased costs in the event Mike was permanently disabled or as a lump sum to help Robyn in the event of his death). The increased premium costs were offset by the administration fee savings from consolidating Mike’s super into one fund.

Results

When the revised insurance inside super was in place Mike was able to alter the terms of his income protection policy outside of super to extend the waiting period to 2 years which would kick in after the benefit period of the cover inside his super fund expired. This change reduced his premium by $180 a month and allowed Mike to continue with this important protection for his family. A little bit of fine tuning to his budget helped him find the rest of the savings he needed.

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Mike and Robyn were happy they did not have to lose the security of the income protection cover and were able to increase the benefits payable in the event of Mike’s death or total & permanent disability to a more appropriate level.

An expert can help to navigate and negotiate, seeing your situation in a new light!

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