A case study: a comparison of the financial situation of a family in which working people have a life insurance of €150,000 and in case they do not have any life insurance.This case study can help illustrate the importance of having such financial security.

This case study can help illustrate the importance of having such financial security.

Assumptions:

• Family: A couple with two school-age children.
• Annual income: €60,000 per year, for ease of reference, we assumed that each partner earns €30,000 each.
• Monthly expenses: €3,500 for daily living expenses, loan installments, bills.
• Mortgage: €150,000 to be repaid.
• Long-term savings total: €10,000.
• No life insurance:

Situation if the family does not have life insurance:

1. Death of one of the parents:

– Loss of income: The family loses an income of €30,000 per year.

-Financial charge: A mortgage payment of €150,000 remains. Monthly expenses remain at €2,500, which is €30,000 per year.

-Savings: The savings are €10,000, which covers less than 4 months of expenses, without adding additional costs related to the funeral of one of the partners.

-Long-term effects: A family may struggle to cover day-to-day expenses, mortgage payments, and children’s education. It is possible that they will be forced to take out an additional loan, sell their property or drastically reduce their standard of living.

2. Consequences:

-Emotional and financial stress: Children may experience more emotional stress, and the remaining parent may have to deal with financial burden and additional responsibility.

A situation where the family has a life insurance of €150,000:

1. Death of one of the partners:

-Loss of income: The family loses an income of €30,000 per year.

-Insurance: The family receives €150,000 in life insurance.

-Financial burden: There is a mortgage payment, all or part of which can be covered by insurance (e.g. €100,000 from insurance can cover part of the loan, which leaves €50,000 to be repaid, this can be spread over very low installments for the remaining repayment period).

– Savings: Insurance gives you extra resources that you can use for everyday expenses and other obligations. When repaying the loan with funds from the life insurance policy, the amount of the family’s monthly expenses is also reduced by the amount of the loan installment.

-Long-term effects: Insurance provides financial stability by allowing the family to cover expenses, pay off or part of the mortgage, and continue living without major changes. The remaining parent has time to adjust the budget and plan for the future without sudden financial stress.

2. Consequences:

-Financial and emotional support: Life insurance helps to alleviate the financial stress of losing income and allows you to focus on emotional support for your children. It also allows you to continue living in more comfortable conditions, without the need for drastic changes.

Summary:

• Without insurance: A family may struggle to maintain their current standard of living, and financial stress can negatively affect emotional health and family relationships. You may need to sell assets or take out additional loans.
• With insurance: The family has additional funds that can cover some or all of the mortgage and provide financial stability during a difficult period. This allows for smaller lifestyle changes and better financial management.

Life insurance can provide significant financial relief, which is especially important if you lose a source of income in your family.

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