A Life insurance solution can be a family income plan
When pondering the question of how much insurance cover to have for the myriad of needs in life, many people just think of covering the three obvious ones, mortgage and loan or inheritance tax liability. All this means that life insurance is probably the most difficult product most people buy. The majority of folk recognise their need to protect their family with life insurance in the event of their death. They are conscious that their dependents should have enough financial protection which will pay out following their death that will maintain the standard of living they have been used to. Furthermore, their recognition of this goes beyond their understanding of mortgage cover or loan and inheritance tax protection. Providing an income to cover this subject matter, which is as near to ones current income as possible, is accepted by most people. Nevertheless, how is it possible for someone to insure against death with a plan which will supply an income equal to your current salary, without it being a lump sum. Without doing complex calculations and making some assumptions that may or may not be right in the future this is far from a science. Most financial advisers suggest a 10 times formula. So if you earn 20,000pa then 200,000 as a lump some should be enough. But again this depends on inflation investment returns and so on and if these figures turn out to be wrong in the future the income that it generates could fall short. Being aware of all this begs the question how can it be solved and why. The solution is in how family income benefit works. With life insurance the benefit is paid in a lump sum which is then invested by the recipients, producing an income they hope will suffice for the time it is required. On the other hand, family income benefit does what it says on the tin, it simply produces the income. Family income plans are bought to protect an income rather than receiving a set amount of money. For instance, in order to protect 30,000 per annum income, take out 30,000 on a family income plan, instead of keeping in line with the formula which recommends buying 300,000. Including indexation benefit ensures the income increases with inflation so that eventually when a claim is made the income replacement benefit is in place in the event of your death. Providing you are looking to cover an annual income or an amount of money per annum rather than capital amounts such as loans, mortgage etc then all the ambiguity of life insurance is removed and family income plan is the most preferred product time and time again. You have to remember that the majority of people don't have the skill inclination or desire to invest money to produce income. So when these people may be your beneficiaries why make them. Make their lives simple give them a set income with a pay rise each year, make sure you family has a family income plan.
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