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.

CHOICES

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.

If you are not completly certain that your coverage is in line with your family’s needs and budget, please He can talk it through with you over the phone, via email, skype or meet with you in person to help you decide whats best for you and your family.

We're always here to help you make the best decisions based on your individual needs, current situation, and long-term goals. Don’t have an adviser? Call : 06 870 3012 or

Shaun Nicol is a New Zealand Registered Financial Services Provider: FSP272065

Protecting your key people in your business

Protecting key people in your business is as important as protecting your business assets such as plant, stock and equipment.

One of the most valuable assets a business owner can have is the right person in the right role but it can take valuable time and money to find the right person for your business.

You may even need to go through a few employees to find the right person, and getting them up to speed in your business, but protecting key people once you have found them is smart.

The payoff is, once the right person is up to speed, they can become very valuable and become a Key Person in your business. But until you reach that point, it’s all investment on your behalf.

What is a Key Person?

A Key Person is someone who contributes to the success of your business, and that your business will be impacted financially if this person were not able to perform their duties.

For example, you may have a sales person who contributes to 20% of your overall revenue, I would consider this person a Key Person.

Identifying a Key Person

Stop for a moment and think about the individuals in your business and how each of them contributes to your business. If a certain individual were to leave your business, and your business would not be impacted financially then this is not a Key Person.

However, if an individual were to leave and your business would feel the pinch financially because of what they contributed, then I would consider them to be a Key Person.

Remember you are the first Key Person!

Protecting key people in your Business

Now that you have identified who the Key Person or People are in your business, you need to protect your business from any loss of revenue when they cannot perform their duties due to sickness or accident or even death.

There are a few methods to make up for any shortfalls in cash flow when these events occur, which are;

You can use reservesExtend lending (if the bank will allow it)Bring in a capital partner (this will take time)Find a suitable replacement (this will take time also)Use an Insurer

Pass on the risk

A cost-effective way of protecting key people in your business in the event of death or disability is to pass on the risk to an Insurer.

This can be one of the cheapest ways to secure funds when your business experiences a loss of a Key Person. You pay a premium for them to take the risk and pay your business the income and capital should any of these events occur.

Some Insurance companies, have specialist solutions to protect Key People in business. Depending on the insurance company you can replace lost revenue, have a lump sum capital injection into the business to meet shortfalls in cash flow, and to incentivize to recruit a new replacement.

Management Plan

You can never eliminate risk in business, but you can manage it, and how much it will affect your business and your personal life including your family members.

If you are not completely certain that your coverage is in line with your current needs and budget, please contact our expert Insurance Adviser Shaun Nicol email:shaun@futureinsurance.co.nz

ph: 06 870 3012 or 0210 391 899 Shaun can talk it through with you over the phone, via email, skype or meet with you in person to help you decide what's best for you, your business and your family.

We're always here to help you make the best decisions based on your individual needs, current situation, and long-term goals. Don’t have an adviser? Call : 021 039 1899 or Click HERE to Talk it through with an expert

Shaun Nicol is a New Zealand Registered Financial Services Provider: FSP272065

PROTECT THE ONES YOU LOVE

You buy life insurance because it is the best way to protect your loved ones.

It is a financial decision…kind of.

It is an emotional decision…sort of.

It is about love and caring and future…most definitely.

That’s the thing about life insurance.

The idea may be simple, but the reasons behind getting it, cut deep, to our very core, almost to an instinctive level.

At the heart of it, if you are like most people, you do so for six very good reasons...

1. Life insurance is about taking care of loved ones.

It is about meeting responsibilities and keeping promises.

If you own life insurance, it is because you view it from your family's point of view, not your own.

You see life insurance as a tool that protects your spouse

and children from the potentially devastating financial losses that can result if you die prematurely.

2. Life insurance is for the living.

It has nothing to do with you. You know that, should anything happen to you, the life insurance you have purchased is in place to protect and provide financial relief for those who must carry on without you.

It’s about them.

3. Life insurance is an expression of love and caring

Because you care about your family...and you love them...you want to ensure their financial security if you’re suddenly not around to do so.

4. Should you die, the proceeds will help you keep the promises you have made to those people who are important to you.

By protecting their financial future, you’re enabling your loved ones to maintain their lifestyle, if something unexpected should happen to you.

5. Life insurance buys time and options.

Too often, when an income earner dies, survivors are forced to make tough, dramatic decisions—and to do so quickly—at a time when they may not be emotionally in a position to make good choices.

Life insurance gives survivors a chance to adjust over time rather than need to look right away for a downsized home or new job.

Your life insurance gives your family choices by providing the benefits to help pay off debts; to help meet housing payments, and ongoing living expenses; to help fund education for your children or grandchildren; and more.

6. Life insurance provides cash when it’s needed most.

Your life insurance policy can deliver a specified sum of money at the exact time of need. Upon your death, your family can be assured that the amount you have chosen—perhaps hundreds of thousands of dollars; maybe even millions—will be there almost immediately.

And that death benefit is not subject to income tax. For example, a $500,000 policy provides $500,000 in death benefit proceeds.

If you are not completely certain that your coverage is in line with your family’s needs and budget, please contact our expert Insurance Adviser Shaun Nicol email:shaun@futureinsurance.co.nz or ph: 06 870 3012 or 0210 391 899 He can talk it through with you over the phone, via email, skype or meet with you in person to help you decide whats best for you and your family.

We're always here to help you make the best decisions based on your individual needs, current situation, and long-term goals. Don’t have an adviser? Call : 06 870 3012 or Click HERE to Talk it through with an expert

Shaun Nicol is a New Zealand Registered Financial Services Provider: FSP272065

In 2015, US insurer Prudential ran a series of ad campaignshighlighting the biases that lead people to make poor financial decisions. These biases, known as heuristics, are mental shortcuts that enable us to make quick decisions that are practical but not necessarily optimal.

I was recently reflecting on decision making in the context of insurance. Consider these facts: about 90% of Kiwi motorists have car insurance, whilst just 25% of income earners hold income protection cover. Why the gap? The Financial Services Council offers some possible explanations:

Kiwis are more familiar with car insurance than income protection insurance;Reliance on ACC for income support; andPerception that income protection cover is too expensive.

Another possible explanation is the concept of loss aversion. Studies have shown that the pain of a loss is twice as great as the pleasure of a gain. In other words, people are more worried about paying the cost of repair after a car accident than the risk of losing income if they are unable to work due to injury or illness.

Don’t believe me? Take a moment to consider how much more likely you would be to purchase income protection cover if you received your annual salary at the start of each year and you were required to pay it back if you were unable to work.

Another heuristic that leads us to make poor insurance choices is availability bias. We tend to worry about things right in front of us. A famous study by the founders of Behavioural Economics, Daniel Kahneman and Amos Tversky, showed that people assessed the risk of an earthquake in California to be greater than the risk of an earthquake in the United States (obviously, California is a state of the USA). The study exploited the fact that earthquakes commonly occur in California, are often reported on by the media, and therefore, more easily available to recall. Consequently, it’s not surprising that we tend to be more concerned about car accidents, which most of us are regularly exposed to.

You can find out more about the insights offered by Behavioural Economics here. And to avoid potentially costly financial mistakes, it pays to get some good advice.

Brought to you by Future Insurance Services, experts in Financial Advice. www.futureinsurance.co.nz