WHAT IS LIFE INCOME COVER?
Life Income Cover is a unique financial solution, especially 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. Life Income Cover is a great solution and can form a very important part of your family’s financial future.
LIFE INCOME COVER
In the case where you may need to insure for millions, your 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.
THE FINANCIAL RISK
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.
REMOVING SOME OF THE RISK
This is where Life Income Cover can remove or substantially reduce financial risk. Let’s say, for example, you did need $2M of over. What you could do is insure for $1M and have $100,000 per year paid to you as an income over 10 years. This way you are not exposed to losing all your 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 to you 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, and when used properly and alongside other types of cover can really be a suitable option if you wanted to leave your family a set 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, then please contact us anytime.