Case Study:

The importance of assessing your personal insurance options

27 November 2018

Michael Ryan, Wealth Adviser |

Personal insurance (death and disability cover) is something many of us often don’t consider until we’ve settled down and started a family. It is regularly the last thing to get sorted and one of the first things to be cut from the budget.

It’s a little strange when you think about it. We typically don’t think twice about insuring our home, contents and motor vehicles, but when it comes to insuring ourselves, we seem to ignore it – as if we have total control over what happens to us. In terms of cost, depending on the level of cover and your age, generally they aren’t much higher than these other types of insurances.

The following case study highlights the importance of personal insurance by focusing on a young couple in their late 20’s who were fortunate enough to organise a comprehensive cover at the right time.

Selecting the right insurance

Adam and Amy came to see BDO in 2014 in order to have an appropriate level of Life, Total and Permanent Disability (TPD), Income Protection, and Trauma (critical illness) cover put in place. They did so at the behest of Amy’s father, who understood the benefit of locking in high quality cover at an affordable price whilst they were young and healthy. As such, their applications passed through the approval process without issues.

Fast forward to 2018. Amy wanted us to review their cover owing to some salary increases. Adam and Amy both had high-paying positions in central QLD in the mining industry and both were progressing very rapidly in their careers. We recommended and implemented some minor changes to their cover, which included extending the waiting period on their income protection policies by 2 months, given they both had plenty of sick leave and had sufficient cash reserves for short term needs and this lowered the ongoing cost of the cover.

Health complications

Within one week following these changes, we received a call from Amy – Adam had gone into hospital after experiencing shortness of breath and trouble breathing. His heart was beating irregularly. He was subsequently diagnosed with Cardiomyopathy, a hereditary disease of the heart muscle that prevents the heart from pumping blood around the body properly, which can lead to heart failure. Upon finding out, Adam’s brother had similar tests and was also diagnosed with the same disease.

As heart failure was now a serious risk for Adam, it meant the best form of preventative action was for him to have a defibrillator surgically attached, which would kick in should his heart ever fail. These two factors meant he was too high of a risk-factor being on-site in the mines as an Engineer. As a result, he had to cease his current occupation, and look for work in an office-based position.

Level of cover

Due to the quality of the cover Adam had, he was eligible for a $1.4million payout from his TPD cover and will also continue to be eligible for up to $13,000/month every month until he is 65 years old (35 years from now), depending on his earnings from his new chosen occupation. We were also able to negotiate with the insurance company to reverse the waiting period changes, which provided an extra two months of payments for Adam.

There are many different types of TPD and income protection policies on the market, but many people think they are covered through their super funds. If Adam only had TPD cover in his super fund, despite being unable to continue in his chosen career due to his condition and suffering a significant earnings loss, he would not be able to claim on such insurance policies given he has an ability to work in other jobs he is qualified for. Income Protection policies in superannuation can also be harder to claim on, with default cover commonly only having a benefit period of two years, as opposed to what Adam has – payments to age 65.

Adam is still coming to terms with what will be a major shift in his career, but he is relieved his lifestyle and long term plans won’t need to change thanks to his insurance cover.

This was all put in place before Adam and Amy started a family. It happened not long after they bought a new home together. Unfortunately, they are in the minority – not many people put personal insurance cover in place while they are young and healthy. Many people choose to avoid personal insurance cover due to costs and not seeing value, while others may feel content knowing they have something in their super funds.

Adam and Amy’s story is a perfect example of how fragile our health can be, even at a young age. Because of their proactivity, Adam and Amy don’t have the financial stress of a reduced income, meaning they can keep their new home while Adam has flexibility in what he chooses to do going forward.

You may feel perfectly healthy and confident you will remain so, but the future is unpredictable. Consider your own lifestyle and family – what would happen if you couldn’t work again, or if you passed away?  If you have adult children, have you asked them about what protection they have in place? And remember, not all personal cover is the same, quality can vary significantly.

If this story has made you think twice about your own situation, or perhaps someone you know, we can help. Contact your Private Wealth adviser to discuss options suited to your needs.


The information in this document reflects our understanding of existing legislation, proposed legislation, rulings, etc., as at the date of issue. In some cases, the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information is not, nor is it intended to be, comprehensive or a substitute for professional advice on specific circumstances.

The financial product advice or information in this document is of general nature only and has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision on the basis of the advice above, a prospective investor needs to consider, with or without the assistance of a professional adviser, whether the advice is appropriate in the light of their particular investment needs, objectives and financial circumstances.