Kill and maim to get point across

In order to get my point about insurance across forcefully to a mum and dad, I usually need to kill one of them.

To get singles on board, I either have to maim them in a horrific car accident, or give them a life-threatening cancer.

Sounds drastic, sure. But we’re talking life and death here, so I have a right, nay a duty, to play God.

(And just in case someone is taking me seriously and has picked up the phone to call the police … these are scenarios I put to people in order to get them to understand that they need to be considering insurance.)

Most people who go to see a financial adviser want help to manage their money, or to  become rich. Few walk in the door asking about insurance. (Though some do.)

So many people need insurance, they just don’t know it. Others sort of know it, but hadn’t done anything about it. Or (the worst), knew it, but ignored it.

It usually takes a bit of shock therapy.

Fran and Mike are in their late 30s, have two kids aged 7 and 4, and a $500,000 mortgage on their second home – the one they bought after the kids arrived. Dad is the breadwinner earning $100,000, with mum likely to return to work part-time next year, when the youngest goes to school.

Let’s assume they’re sitting in front of me.

“Mike, sorry, I’m killing you off. You’re dead. Car accident on the way home from work this evening.

“Fran, he’s gone. What do you need?”

Often, this will be the first time that Fran has really thought about it.

She wants the home mortgage paid out. She doesn’t want to go back to work next year – the kids don’t have a dad anymore and she wants to be there for them permanently until high school. And she and Mike had spoken about private schools for the kids.

“So, at least $1 million then, Fran?”

“Um … uh-huh!”

Now, let’s flip it.

“Fran, you had a heart attack at the gym after you dropped the kids at school. No warning. Pulmonary em …”

“But I’m really fit!” she chips in.

“… bolism. Sssh, Fran! Dead. As a doornail. Sometimes gym junkies cop it too. Now, Mike, what do you need?”

Mike doesn’t know. He’s thinking about it for the first time. Let me help:

“Okay, so you probably also want the house paid off. They don’t have a mum anymore, so you’re probably going to want to work less and make sure you’re home by 6 each night. Have them picked up by nannies after school each day.

“Work might have been a big part of your life until now. But with no Fran around, work will probably take a back seat while the kids are little, yes? Want the school fees covered too, Mike?”

Mike will often have been in a stunned silence to this point. Now, he might nod, or eke out a “yeah”.

Here are two people who have thought about insurance for the first time and considered the realities.

Next, it’s time to consider the other “life insurances” that are: total and permanent disability (TPD); trauma, and; income protection insurance.

What would happen if Mike didn’t die in that car accident, but ended up in a wheelchair (TPD)? And what if Fran didn’t have an embolism, but was diagnosed with an aggressive breast cancer (trauma)?

Lives would change. Priorities would too. And financially, there would definitely be some big changes happening.

What is this young family’s biggest asset? Unless you answered “Mike’s and Fran’s ability to work”, you were wrong. Mike has 25-plus years left in the workforce. On his current income (ignoring any pay rises), that’s $2.5m to $3m.

That’s what is going to pay for their lives – meet the mortgage, put food on the table, educate the kids, pay for the holidays.

(I’m not ignoring Fran. But she doesn’t have an income, currently, to insure.)

Insuring Mike’s earnings for this young family is critical. And it’s tax deductible. It should be a no-brainer.

Advisers need to kill and maim and generally play God to get the point across about insurance. If you need some convincing, let them do it with you.

Bruce Brammall is the author of Mortgages Made Easy and managing director of Bruce Brammall Financial. E: bruce@brucebrammallfinancial.com.au.