AFRM SERIES: Do I need risk insurance? Part Three

Posted by Bethany Shaw on 26 April 2016

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Older business guy croppedThis month in our 'Do I need risk insurance?' series we meet Dr Chris Turner.

Who am I? 

I am Dr Chris Turner, aged 57. I have been divorced for five years and have three children aged 18, 16 and 13. Three years ago I remarried. My new wife Anna has no children.

What is my financial situation?

I earn $550,000 per year as a surgeon, however I lost 80% of my assets in the divorce. I have recently purchased an apartment for $2.2m in Melbourne’s South Yarra. I have around $500k in super.

Why would I need risk insurance?

Although I have a high salary, at this point in my life I am asset poor as my ex-wife retained our family home as well as other assets. I now have a large mortgage and a new wife relying on my income.

What should my financial adviser ask me?

What outcomes do I want for Anna in the event of my death?

What outcomes do I want for my children and maybe my ex-wife?

Do I want my children to be able to continue attending private schools and university?

If I were unable to work would I be happy to sell and downgrade my current apartment or do I want to continue the lifestyle I have now?

How much would I like to have saved for retirement?

My financial adviser said I should consider the following:

Life insurance – if I died, a life insurance benefit could be used to pay off the mortgage for Anna and provide her with an income stream. It could also provide a lump sum to fund education for my children and to provide them with a bequest from my estate.

Income Protection, Total & Permanent Disability and Trauma Insurance – I know I need to work until age 70 to save enough for my retirement. If something happened to me and I was unable to continue working, I would no longer be able to service my current debt, provide an income for myself and Anna or be able to achieve my retirement goals. These types of insurances will protect my future financial security.

It wouldn’t happen to me though….

We like to think that ‘it will never happen to us’, but 3 in 4 Australians will be diagnosed with a serious illness during their working life.

Real AFRM example

Our adviser met with a very wealthy client shortly after he had separated and now had a new partner. Our adviser asked him what would happen right now if he died prior to the property settlement – who would inherit his assets? As his separation had been acrimonious, he felt his first family expected to inherit everything in the event of his death, and would fight to stop his new partner receiving anything. Our advice meant he took out a policy which would pay out to his new partner if he died, leaving his first family with all his existing assets.  Once the property settlement had taken place (a few years later), his cover needs were reviewed.

If you would like to speak to one of our advisers please contact us. 

Please note, this information has been prepared by Australian Financial Risk Management Pty Ltd (AFRM) ABN 21 001 696 868. AFRM hold an Australian Financial Services License (AFSL) 237186. The information is for general purposes only and has been prepared without taking account of your objectives, financial situation or needs. AFRM recommends that you seek professional advice before acting on any information contained herein.