Case study

Background

Applicant details: Strokes Painting & Decorating

Life assured: Mr J Crown

Occupation: interior painter and decorator

Salary: £40,000 a year

Description of occupational duties and skills:
Mr J Crown is a self-employed painter and decorator and runs his business from home.

Additional information:
Mr Crown is 35 years old, married with two children (ages four and six). His wife is 35 years old and isn't in employment, so he's the sole earner. They have a £150,000 mortgage.

Possible recommendation of cover needed

Because Mr Crown is a sole trader, his cover is written under the Personal Protection menu. This recommendation includes waiver of premium.

Benefit type	Life to be assured	Benefit amount	Term
Life with critical illness	Mr Crown	£150,000	25 years
Life with critical illness family income benefit	Mr Crown	£15,000 a year	17 years
Life with critical illness family income benefit	Mr Crown	£15,000 a year	15 years
Income protection	Mr Crown	£1,800 a month (55% of gross earnings)	25 years
Life with critical illness family income benefit	Mrs Crown	£20,000 a year	15 years
Income protection on:	Mrs Crown	£1,250 a month	15 years

Rationale for recommendation

Because Mr Crown runs his business from home, he has very few overheads. Although he has the freedom of being a sole trader, he doesn't have the security provided by working for a large company such as sick pay or death-in- service benefits. If Mr Crown is unable to work, his income will stop and his business will collapse.

As he's the sole earner, it's important that he provides an income for his family if he's unable to work due to illness or injury. By taking out income protection on a four-week deferred period, he'll reduce the impact any loss of earnings may cause and the 25-year term matches the Crowns' mortgage term.

Additionally, family income benefit would provide a regular annual income for his wife should he die or suffer a critical illness.

Taking out separate mortgage protection cover will reduce his family's liability if he dies or becomes critically ill.

Taking out two separate life with critical illness family income benefits for £15,000 a year to age 21 for each child will roughly replace Mr Crown's earnings after tax if he dies prematurely or suffers from a critical illness.

Life with critical illness family income benefit on Mrs Crown for £20,000 a year would allow her to provide for the children. There's also income protection of £1,250 a month with a deferred period of 13 weeks.

If the recommended cover doesn't fit in with Mr Crown's budget, the plan is flexible so it can be changed to suit his needs.

Premium and commission information*

Life to be assured	Total premium	Total commission
Mr Crown	£344.13 a month	£6467.36
Mrs Crown	£65.29 a month	£1227.02

*Source - AEGON Scottish Equitable, 23 February 2007.