William is a global logistics director from the US, is in his mid 50’s, divorced with two grown-up non-dependent children who also live in the States. He remarried a few years back and lives with his wife Annie and their seven-year-old daughter in the People’s Republic of China. His wife is 34 and she often worries about what would happen to her if anything happened to Bill.
One of Bill’s close friends recently suffered a heart attack and died. This prompted Bill to do what he had meant to do for some time – review his existing family protection provision.
Bill has a salary above US$ 1 million per annum, and his company recognises his worth. They have taken out key man insurance allowing them to replace Bill if he were to die in service by bringing in an executive from a competitor to match Bill’s experience.
Unfortunately, Bill has not recognised his worth to be the same. Upon review, he realised he had just US$ 330,000 life cover with no critical illness protection. Following his friend’s death, Bill no longer considers himself immortal and is keen to get adequate protection in place.
When we asked Bill about the standard of living that he wanted for his wife and daughter if he suffered a critical illness or death, he replied that they would need a similar lifestyle and income to what he currently provides. Unfortunately, this meant that Bill was woefully underinsured.
Family Protection Calculations
When his Platinum consultant advised that he needed an additional US$ 19 million in cover, he nearly fell off his chair! Only when we explained the calculation method of the ongoing requirement, he accepted that it was prudent to insure for 20 times his annual salary. This would allow a 5% yearly withdrawal, matching his current salary and providing the standard of living he wanted for Annie and their daughter.
Like most people today, Bill could not afford the premiums to meet his shortfall. Still, he realised that some cover was better than no cover and went for an affordable amount based on his standard of living and protection goals. With this in mind, he settled for US$ 5 million Life Cover and US$ 1 million Critical Illness protection to safeguard his family’s standard of living for the future.
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