Case Study - Heart Attack
I read an interesting Facebook post recently which I thought would make a good case study to dissect. Mary* is a 40 year old woman working casually and considered herself to be in great health. Mary was unlucky enough to suffer a heart attack which took her off guard considering how healthy she considered herself to be, she never expect it to happen to her. Mary was required to take a month off work to recover under her doctor’s recommendations.
During this month off work, Mary had to continue to make her home loan repayment, her car loan repayment, and meet her other costs of living. The Heart Foundation estimates that the total out of pocket costs associated with a heart attack can be around $25,000, in addition to Mary’s usual living expenses for the month.
Mary didn’t know how she was going to meet all of her expenses. Mary’s doctor suggested she look into making a withdrawal from her super. Mary didn’t have a particular large amount in super as it was, so any withdrawals would make significant impact on her retirement. Mary attempted to make a withdrawal under financial hardship grounds, but realised that under this condition of release, she needed to be receiving Centrelink benefits for 6 months and be unable to meet her cost of living. She may have been able to access her super benefits for some of her medical costs, but not to cover her usual cost of living.
Had Mary have come to see me while she was healthy, there is a couple of things I would have recommended to her which would have taken the financial stress out of having a heart attack.
Income protection would cover 75% of Mary’s income. To make an income protection claim you still need to serve your waiting period, knowing that Mary has no sick leave or annual leave, I would have recommended the shortest waiting period available (normally 14 days depending on the insurer). Given that her cashflow is relatively tight, I would have considered the option of holding her cover inside super so she didn’t need to pay the premiums out of pocket. An income protection policy with a monthly benefit of $3,000 would cost a 40 year old female administrative worker around $100-$200 per month depending on the cover options chosen.
Trauma cover provides a lump sum payment for a number of medical conditions, usually for things like cancer, heart attack and stroke. When Mary suffered her heart attack she would have received a lump sum payout which could have been used to cover her medical costs without having to withdraw from super and impact her retirement, cover her cost of living while she was waiting for her income protection claim, and take the stress out of the potential for a longer recovery. Trauma Insurance can’t be paid for from super, so we would have found a package to balance her coverage with affordability. A $50,000 Trauma policy for a 40 year old female administrative worker could cost as little as around $20-$30 per month.
The biggest take away from this story – your ‘Plan B’ needs to be put in place while you are still healthy, there’s not much that can be done after the fact. As much as I am there to support my client’s if they need my help to make a super withdrawal under medical grounds or financial hardship, I don’t enjoy the conversation when I am explaining the impact a large withdrawal will have on their retirement.
If you would like to protect yourself from falling into a situation like Mary’s, you can get in touch with Solace Wealth Management on 0423 313 486 or Kate@solacewealth.com.au.
