Case Study: inadequate life cover

NOTE: This post is more than 12 months old, and the information contained within may no longer be accurate.

Most case studies on this website highlight an example where personal financial advice has been received, and that advice has helped somebody to make a positive change or decisions.

My intention is to break that trend by use of the case study where inadequate planning was made; a clear gap in life cover should be evident, and I show how an inferior outcome was realised that otherwise might be achieved.

Donald, a widower of some 20 years previous, and had a second family, but no life insurance provision.

Despite being an accountant who had given financial advice and “sold” insurance policies himself prior to the Financial Services and Marketing Act, Donald had no personal protection in place. This was despite having a wife who was unable to work due to a previous injury (she was ex-NHS) and two children under the age of 18.

Maybe Donald had the impression that “lightning never strikes twice” but when he unexpectedly died at a relatively young age he left a widow and sons aged 14 and 16. His lack of life insurance meant a significant change to their financial circumstances, for the worse.

As a professional he had built for his family a life that was comfortable, but this changed when he died. Despite having no protection the family had assets, and it was this relative good fortune that meant there was limited threat of his widow and boys living in the kind of poverty that many single-parent families live in

Nevertheless circumstances changed significantly.

Donald’s widow decided to move downmarket shortly after her husband’s death, releasing some funds. She subsequently moved several times thereafter: in the end she had moved from a substantial four-bedroom detached property to the property she now occupies: a two-bedroom flat.

Sacrifice by Donald’s widow meant that their sons did not “go without”, but nevertheless there were financial pressures both immediately after his death, and beyond. The sons experienced additional pressure as teenagers, and through adult life, with the eldest leaving university with a five-figure sum of debts, despite working all the way through in part-time jobs through term-time and full-time jobs over holiday periods.

With adequate life insurance Donald’s family would no doubt have been able to retain the family home and not had little or no financial concerns like they experienced. There is always upset when a parent dies, but with life assurance they could have continued their life as was and this would not have led to broader choices and unlikely to have seen Donald’s widow move, nor the boys faced with the debt that they had in their younger life.

Life insurance does not do anything for replacing the deceased, but it can make decisions less stressful, at a time of inherent uncertainty and turmoil, and this case study is an example where a life policy would have improved both the widow and her boys outcomes.

As a financial adviser I am proud to offer meaningful and life changing advice, often at the point of retirement, but I’ve addressed the under-insurance of many families who I have advised, and also assisted those who have been sadly bereaved.

It is unfortunate that articles like this printed in The Times attempt to paint life insurance as poor value, and it is common that there is a perception that cover for a mortgage or an employer’s death in-service scheme will be adequate. The reality is that lump sum provision should often be 10 to 20 times income, maybe more, and I just don’t see this level of cover with most people.

I can say with confidence that life would be very different for this case study if adequate plans were made. I am Donald’s eldest son and whilst I consider myself to be fortunate in many regards, I did not have the easiest teenage years or early twenties, and my circumstance may explain my passion for ensuring families are adequately provided for in the event of bereavement.


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27 Oct 2023

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