The importance of having the correct amount of personal insurance cover in place
Stephen and Fiona's story*
Stephen and Fiona* recently purchased a family home, and like many young people, needed to borrow a substantial amount to settle on the property. Stephen and Fiona have two young children, with a third on the way.
Their mortgage consultant recommended that they increase their existing personal insurances, which did not completely cover their new mortgage. They agreed that they needed additional personal insurance cover, however they felt that the additional cost was not affordable.
Stephen works full time, and Fiona works part-time from home.
They came to us as their budget was “tight”, and they wanted to explore any opportunities that would allow them to generate some surplus cash flow that could be used to fund additional insurance cover and make extra mortgage repayments. They also wanted us to review their personal insurance cover.
Stephen and Fiona’s insurance cover was reviewed and we assessed the level of cover required.
We recommended that their insurance cover be purchased through their respective superannuation funds, whereby the premium (cost of the cover) would be paid by their superannuation fund and have no impact on their budget.
Once the new insurance was in place, we recommended that their existing insurance cover be cancelled, as they had adequate cover inside their superannuation funds. This resulted in some budget savings, allowing them to increase their mortgage repayments.
* Names have been changed to protect client privacy.
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