Anything that is truly important in our lives requires a strong foundation. For instance, relationships need a foundation based on trust and mutual respect, business partnerships require a robust plan and a good blend of skills and expertise, and all buildings need to be built on good footings and strong foundations.
The purpose of any foundation is to build something resilient, something that can handle what’s both expected and unexpected – basically, whatever life may throw at it.
The same concept applies when it comes to a financial plan.
We may have a diversified investment portfolio that provides both capital growth opportunities and income, but if protection isn’t at the heart of our plan, it is lacking a strong foundation.
Insurance is all about mitigating risk, and one of the essential pillars of any insurance or protection plan is life insurance.
In essence, life insurance ensures a lump sum is paid in accordance with your wishes in the event of your death. In that regard, it is possibly the most simple of all insurances on offer.
Some of the main reasons for taking out life protection are:
- To provide for your family and replace income that will no longer be earned in the event of your death
- To provide funds for your children’s future education needs
- To pay down debt, both personal and business, and to relieve the stress of the remaining debt holders
- To ensure your business is taken care of
- Key Person protection, allowing for replacement or training of new key people
- To provide a legacy
- To give to your chosen charities, or indulge in philanthropy that you couldn’t throughout our lifetime
- To provide some peace of mind financially to those left behind
Although we will never personally benefit from the payout, we know for sure that there are plenty of people who can or will. Most policies also include a terminal illness benefit, which can pay out a lump sum if you’re diagnosed with an illness that means you’ll pass away within 12 months. This also provides time to financially ensure that those last essential things can be arranged to your satisfaction.
There are many ways to structure life insurance too – premiums can be funded personally, through businesses or trusts, or even through superannuation or via self-managed superannuation funds. In some instances, premiums can be tax deductible.
Have you had a chat with your adviser recently to ensure your estate is adequately provided for and that you have the best structure in place for your needs?