The Simpsons Seek Financial Advice

The Simpsons Seek Financial Advice by Ashley Biglin

We often ask our technical team to provide articles explaining our services to give you a better understanding of what it is we do and how we can help you. Paraplanner, Ashley Biglin, has written a case study around protection involving some characters you may be aware of. Take a look below…

Homer and Marge Simpson have recently come to us for financial advice with concerns around the lack of protection in place for themselves and their income. Firstly, we conducted a free, no-obligation first meeting to inform the Simpsons of the services we could provide. Once they confirmed they were happy with the service we offered, our financial planner carried out a Discovery meeting to obtain all the relevant information to be able to conduct the research and advise the clients via a Financial Planning Report. Their current circumstances are:

Homer Simpson

Gender: Male
Age: 36
Spouse: Marge
Financial Dependents: 3
Occupation: Nuclear Safety Inspector
Place of Employment: Springfield Nuclear Power Plant
Net Annual Income: £22,500
Income details: Employment Income
Interests: Donuts and Duff Beer

Marge Simpson

Gender: Female
Age: 34
Spouse: Homer
Financial Dependents: 3
Occupation: Housewife
Place of Employment: n/a
Net Annual Income: £2,501
Income details: Child Benefits, broken down as £20.70 pw for Bart, £13.70 pw for Lisa and £13.70 pw for Maggie
Interests: Painting

Bart Simpson

Gender: Male
Age: 10
School: Springfield Elementary School
Financial Dependent Until: Age 21
Interests: Skateboarding and playing with slingshot

Lisa Simpson

Gender: Female
Age: 8
School: Springfield Elementary School
Financial Dependent Until: Age 21
Interests: Saxophone and revision

Maggie Simpson

Gender: Female
Age: 1
School: n/a
Financial Dependent Until: Age 21
Interests: Dummy

Their mortgage will be repaid when Homer is 61 and Marge is 59.

Objectives

From the Simpson’s discovery meeting with our adviser, their current concerns led to the following objectives for Homer and Marge:

  1. For their outstanding Mortgage to be repaid in the event of either of their deaths
  2. To ensure their 3 children would be provided for in the event of Homer or Marge’s deaths
  3. To replace Homer’s income should he be unable to work due to an accident or sickness

Possible Solutions

Taking the clients’ circumstances into consideration, we would suggest the following as solutions:

Objective 1 Solution: Mortgage Protection

Decreasing term assurance is a form of protection. The sum assured will decrease over the term of the plan in line with a set percentage, which matches the natural reduction in the mortgage amount over the years. It is considered a cheap form of protection for the benefit it offers in protecting families’ greatest liabilities.

A possible solution based on Homer and Marge’s circumstances is to cover the outstanding mortgage of £121,127 for the remaining term of the mortgage (25 years). This also includes critical Illness cover, which means should either Homer or Marge suffer one of the specified critical illnesses of the protection plan and survive a specific survival period, the plan will also pay out the sum assured for them to be able to fully repay their mortgage.

Objective 2 Solution: Family Income Protection

Family Income Benefit is a protection plan which in the event of the assured’s death will pay out an annual income for the remaining term of the plan. This can include escalation to keep in line with inflation rates.

As Homer and Marge would struggle to support their 3 children in the event of either of their deaths, we agreed that £15,000 pa per child, would be a sufficient sum assured and that 20 years would be a suitable term (which is when the youngest child, Maggie, is expected to be financially independent).

This will help the children with university fees, should they go down this route and ease the pressure on the surviving spouse. This has been recommended to be placed in trust so that the policy is paid to the beneficiaries quicker and without confusion.

Objective 3 Solution: Income Protection

Table 4 - Informed Financial Planning

Income Protection is a protection plan which in event of accident, sickness or ill health will pay out a percentage of the sum assureds’ salary, usually on a monthly basis. This will pay out after a chosen deferred period, usually 28 weeks when statutory sick pay ceases (depending on place of work).

As an incentive for the employee to return to work, Income Protection usually covers around 65% of the insured’s annual salary. Therefore, our recommendation covers the maximum cover for Homer, until his expected retirement age of 65.

Marge also stated that in the event of this it would be possible to begin a part time job on a night at a local bar, Moe’s Tavern, to support the family further.

After agreeing to our recommendations, the Simpsons can now sleep well knowing they’re family is protected in the sad event of Homer or Marge’s passing.

Should you have any concerns or worries around your protection for yourself and your family, or indeed any other financial planning needs, give us a call on 01482 219 325 or email enquiries@informedfinancialplanning.co.uk.