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Financial Planning & Life Insurance

Life insurance is a common sense way to look after your loved ones, particularly if you are the chief earner in your household.

No one likes discussing death, but it is a fact of life, as is the fact that those you leave behind need to be protected. A good policy will allay any fears you may have for their financial security, as the right policy will ensure that any bills like the mortgage can be paid, as can your children’s educational needs, it can even pay for the care of elderly or infirm parents.

Paying Final Expenses

Unfortunately, it costs quite a lot of money to be properly buried in the modern era, with even inexpensive funeral costs running at $8,000, with more lavish ceremonies costing more than $15,000. As you can see, coffins, burial plot and funeral services do not come cheap. This is a lot of money in anyone’s language, and can erode life savings designed to provide protection for your loved ones.

You can buy pre-need burial insurance, which takes difficult matters involving your death such as burial plot and casket choice out of your spouse’s hands, as well as paying the costs before you die. That said, it is preferable to pick a substantial life insurance policy that allows the beneficiary to choose what way to use the payment.

Mortgage Payments

A mortgage is almost always the biggest expense in any individual’s life. With other bills such as insurance, taxes and so on added to this, stress from financial matters can build up fast, so it is advisable to take care of all these together.

If you take away the main financial provider, suddenly the financial strain becomes too much, and the damn bursts, causing loan and mortgage payments to be missed.

To alleviate this stress, buy life insurance, as the resulting payment will take care of any mortgage or loan payments immediately, avoiding further interest being accrued, leaving you with peace of mind, and your family being able to carry on without worrying about losing their home.

Children’s Education

Usually the best jobs go to college graduates, but the cost of third level education has sky rocketed to around $32,000 a year, so if you want your children to receive the best education, then you must treat it as an investment. Such seemingly exorbitant costs are often well beyond the scope of any student, as well as their family.

Taking Care of Parents

If you parents are still alive, they may need assistance in their old age. They have looked after you all your life, now is the time to show your love for them. If they are in need, it is their adult children who are usually responsible. Their medical care and medications are expensive, and they may not be able to cover the costs with their pensions alone. Choose a life insurance policy that pays for senior care expenses, otherwise, the price may be too high to deal with, leading to stress and anxiety from all quarters.

Being Financially Prepared

Life insurance is a vital component of anyone’s financial plan. A good life insurance policy will guard against financial woe, allowing for a high standard of life for your loved ones.

What Is A Family Income Plan-Life Insurance Policy And Why Have One?

In this article I will discuss the benefits of a little known but very important plan called a family income plan which is also known as family income benefit. I will explain how the plan works and further I will go into how this type of plan can benefit the average client looking for life insurance.

First of all it is important to understand the various needs for life insurance and therefore have a greater understanding of were exactly the likes of family income plans fit within good financial planning.

There is generally only a handful of reasons one would have life insurance. The obvious ones are family protection and loans or mortgage protection. Mortgage protection or loan is quite simple you have a liability of a certain amount of money, so best advice dictates that you should insure exactly that amount in the event of death, and if funds allow in the event of a critical illness. Family income benefit does not cater for mortgage or loan protection for reasons that will be later explained.

Family protection is where family income plans fit perfectly. Family protection is all about making sure that your family or your dependents are adequately taken care of financially in the event of your death. In order to suitably meet this need you invariably have to have a figure to insure, an amount of money that your dependents would need in order to maintain their standard of living in the event that the worst actually happens.

A lot of people tend to use their incomes as a good benchmark to work from when ascertaining what level of cover they actually need. The reason for this is during life you may support your family to the tune of 25,000 for example, so it is fair to say that in the event you die they would need 25,000 per annum in order to maintain their standard of living.

Before the likes of family income plans people only had lump sum insurance plans to to take out as protection. This meant people would have to work out what size of lump sum they needed if they wanted an annual benefit of 25,000. Due to the fact tat they would never know what future inflation or investment returns would be meant this was far from an exact science and again from a good financial planning point of view was a poor and risky way to work.

Along came family income benefit. In short this plan pays out the annual required benefit. So if you wanted 30,000 per annum you took the plan out with that level of sum assured and then if the worst happens the plan pays out 30,000 per annum.

The plan went a bit further to ensure that it did the job correctly, by including something called indexation. This meant that each year the value of the benefit actually increased to ensure that if and the when the worst actually happened the amount your loved ones would receive would be the right amount regardless of how high or low inflation had been. Furthermore once claimed it would continue to rise with inflation making sure that continued to maintain that value from the benefit.

So in summary if you are looking for family protection and it is a level of income you are looking to protect, which 99% of time it really should be, then family income benefit is generally the right plan for you. It will ensure you have adequate cover to protect your family in the event of your death and it will continue into the future with inflation protection as a result of the indexation benefit available as an option within the plan.

Why Life Insurance Should Be Part of Your Estate Planning

Estate planning is about making sure you take care of your spouse and family should you pass away. Life insurance plays a critical role in assuring their comfort.

Most people view life insurance as a one dimensional tool. They know and understand its value as a means of replacing the lost income of the policy holder for a certain length of time after his death. It is a means of protecting the family and dependents from financial disaster in the case of untimely and unexpected death. Fewer people have learned of the use of Life Insurance as an investment instrument that is capable of supplementing other elements of a comprehensive retirement plan.

Even fewer people fully understand the value of life insurance in estate planning. Life Insurance is a tool that can be used to transfer wealth from one generation to the other in a manner that minimizes the amount of that wealth lost to taxes. There are several ways that this can be done and it makes your Life Insurance agent a partner in the estate planning process in the same manner he is a partner in your personal finance planning and investment planning.

The basic death benefit from an insurance policy often makes up a large portion of the estate of the deceased person. This is why the taxation implications and the selection of beneficiaries is an important element. It also illustrates how all of the various financial planning areas must be coordinated. The basic life insurance policy will play a role in both financial planning and estate planning. It also might very well figure in retirement planning.

One example of how life insurance can play a creative roll in the transfer of wealth while minimizing taxation is the use of the $10,000 tax free yearly gift allowance. It is possible to make a yearly tax free gift to a child with the intention, but not the requirement, that the money is used to pay a premium on a life insurance policy. The life insurance policy is just about the only investment vehicle where the full amount of the return is available from the first day of the investment. You can imagine how much life insurance can be purchased for a premium of $10,000 yearly. The full amount of this policy represents wealth that is protected from taxation.

There is no question that your life insurance agent can be a trusted partner in the estate planning process. The ability to transfer control of your policy to a Living Trust and the investment and taxation implications for your beneficiaries are just two examples of the kinds of estate planning questions that you will need the guidance and advice of an insurance professional to answer.