Alastair, a management consultant who had been a long-time client of Garrick’s had a career change and bought a pub with other family members. He had a high level of income protection as Garrick covered his consultant salary. However now as a pub owner Alastair’s income has reduced and he also does income splitting with his wife, which further reduces his taxable income. He wanted to reduce his income protection cover to be more in line with his current income.
Mandy, who had recently taken over as Alastair’s adviser, reviewed his current situation and advised that due to the fact that income would still be coming in from the business, he would only receive a limited income protection benefit at claim time, as the insurer will “offset” (deduct) any other income from his Income Protection benefit. Mandy recommended that Alastair cancel his Income Protection insurance and instead take out a Mortgage Protection product that would enable him (if he went on claim) to receive his full Mortgage protection benefit, as well as receiving the income from his business.
Mandy also recommended that the business put Key Person cover in place, to provide a monthly payment to employ a publican if something should happen to Alastair. This would keep the business in a sound financial situation, and would also maintain Alastair’s profit share from the business while he is unable to work.
With these new covers in place, if Alastair was to go on claim, he would receive the full profit share from his business, as well as the full Mortgage Protection benefit, both of which should cover his monthly expenses. He would also no longer be paying a premium on cover that he will never receive.