Why Life Cover

Looking after those important to you in the event of your or your partner's untimely death means providing them with the financial stability to cope. It is a wise and practical choice that offers the reassurance that the future financial welfare of your loved ones will be secure. Glen Hatcher

The saying that there is more than one way to skin a cat is so true when it comes to financial protection.  Many of us have Life Insurance.  However are you aware of the issues around this? The way it is set up and owned? Does it have a specific purpose and is it calculated correctly?  With this in mind. We all need to consider the following motto!

“The RIGHT amount of funds,
from the RIGHT source,
passed to the RIGHT party,

at the RIGHT time!”

What is Life Insurance used for:

  • Family Protection - In New Zealand it is estimated it costs $10,000 per annum per child to raise each child.  If the major income earner dies, how does this affect the income normally being generated into that family unit? Providing to ensure the family has enough income to maintain their standard of living is essential to the health and well-being of the family unit.  Life Insurance can be a lump sum payment, drip fed to families or a combination of both.
  • Debt Protection - Major debt like House Mortgage is generally well covered from an insurance point of view.  Protecting people's biggest asset and providing a roof over loved ones heads is a vital consideration.  Other debts such as business debts, personal loans, and other capital payments owned to individuals can be missed out though in the calculation but should be considered essential as well.  Separating these purposes out is also vital especially when calculating how these premiums are to be paid, who pays and should they become a tax deductable expense.
  • Trust Ownership - Do you have a trust?  Do you know who should own your life insurance policies then?.  Should they be cross owned, owned individually or owned by the trustee's of the trust?
  • Shareholder Agreements - Are you a Shareholder of a business?  What happens to those shares if one business  partner dies?  The use of Life insurance can be much more beneficial than the alternatives of having to raise capital to buy those shares off of someone’s estate or go in to business with the partners family.  This can get very messy.  Having an agreed level of cover in place to purchase those shares and buy the family out is a fantastic strategy.
  • Key Person Cover - Providing a cash lump sum in to a business on the death of a Key Person will ensure that the business has the cash-flow to continue trading.  You may need to hire a replacement or have a financial controller step in to take the business over.  If the Key Person is the business, then wind up costs (incl tax, lease agreements, liabilities and trading costs) can be considered and dealt with.

Life Cover provides a lump sum payment to your dependants, or other nominated beneficiaries, in the event of your death. Whether it is buying a new house, paying off the mortgage or bank loans, education or retraining, your loved ones will have more choices to help them get on with life.

For more information please contact...
Glen Hatcher

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