Life Income Cover – what is it and why you may want to think about it.

When it comes to financial planning and assessing how much someone should be insured for, the answer is subjective and depends on what your current and future financial commitments are as well as your priorities and budget.

During this risk assessment process, it is common to hear that you should be insured for millions, especially if you want to leave your surviving spouse and dependents the household income you were generating. However, managing a large lump sum of cash can be a challenge for some people.  Life Income Cover is a great solution and can form a very important part of your family’s financial future.

In the case where you may need to insure for millions,  Life Income Cover benefit can remove a lot of the financial risk which comes from receiving such a large amount of cash.

For example, if you needed to insure for $2M and then at the time of your death the insured amount of $2M is paid to your spouse. Your spouse has now become a millionaire and is now at risk of making poor financial decisions, which could lead to the partial or even complete loss of such a large amount of money.

In times of grief and loss, the surviving spouse (male or female) is not normally in a state of mind to manage such a large amount, and possibly even after such a recovery period, they may not have the skills to manage such a large amount of money.

Well-meaning friends suggest property, or shares, or talk to their investment adviser and so on.

I am not saying that any of these are wrong, what I am saying is that there are risks, and they should be managed.

This is where Life Income Cover can remove or substantially reduce financial risk.  Let’s say for example, you did need $2M of cover.  What you could do is insure for $1M and have $100,000 per year paid as an income over 10 years.

This way your family are not exposed to losing all of the money through mismanagement or poor investment choices.

Part of your initial assessment for $2M may have been a requirement to leave an income for your family for 10 years, so instead of getting all the money up front, you can have it paid out over a set period and therefore gets used as intended.

Life Income Cover provides more choices when it comes to managing the financial risk to your family. When used properly and alongside other types of cover, it can be a suitable option if you want to leave your family income for a set period such as 5 years, 10 years etc.

Life Income cover is not based on your actual income or occupation. It is a simple product where you choose the income you want to leave your family each year and how long you would like this income paid to them.

If you have any questions about Life Income Cover and would like to discuss how this would work for you, please contact us anytime.

___________

Information and Disclaimer:  

This article is for information purposes only. It does not take into account your individual needs or personal circumstances and so is not intended to be viewed as investment or financial advice. Should you require financial advice you should contact Miles Flower on 021 645 000.