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When you plan for the future, one of the things you count on is continued income for yourself and your family. Your premature death could result in a drastic reduction of your family's standard of living. There are no U-turns on the road of life. We are all travelling on an inevitable trip from birth to eventual death. You may die sooner than expected or hopefully live a long and prosperous life. Life insurance addresses the tragedy of premature death by providing tax free funds to help survivors who depended on you, get on with their lives.

The effects of not protecting your loved ones can be devastating. Not only will they lose the benefit of your income forever but they will also probably have to pay tax on the value of every asset that you have ever worked for. So by doing nothing, the quality of life for your family could be laid waste and a high proportion of what is left may go in inheritance (IHT) taxes.

What to Do...

Our first piece of advice is this: GET COVERED!
Set up term life with Pinnacle with coverage to your intended retirement age.

  1. Why term cover and not whole of life or permanent cover?

Life insurance is a practical instrument designed to protect a bereaving family from financial hardship or shortfall due to the death of the main breadwinner. But once you have retired and the children have grown and embarked on their own lives, is it practical or sensible to continue making monthly payments for what could be decades? After all, you have your retirement planned and are now financially secure. Is it not common sense just to cease making payments to something which is no longer relevant or practical?

2. How much term life insurance do I need?

Since life insurance replaces lost income if something happens to you, the proceeds from your policy should be enough to cover immediate expenses as well as to provide continuous income for your beneficiaries. Pinnacle recommends coverage that's eight to 12 times your annual income. For example, if you earn $50,000 per annum, you might consider coverage between $400,000 and $600,000. If you're younger and just starting a family, you might need as much as 15 times your income to allow for salary increases. Since individual needs vary, we recommend that you speak to one of our wealth managers to determine what's right for you.

3. Is the death benefit guaranteed?

It is so long as you maintain the premiums. For example, a fully guaranteed 20-year term means that your premium is guaranteed to remain the same, or level, for a full 20 years as long as you pay the premium. The coverage, or death benefit, also remains level. The insurance company cannot cancel your policy or raise your premium for the length of the term, as long as you pay the premium. The same is true for 10-year, 15-year and 25-year guaranteed terms. In contrast, whole of life plans are only guaranteed for five years and can be reviewed annually (depending upon the contract).

4. How long do I need protection?

The number of years' coverage you need depends on several things, but the most basic consideration is how long you expect your beneficiaries to be dependent upon your income. If your spouse is your beneficiary, you should consider being covered until you plan to retire. If it's your children, you'll probably want to protect them until they're 18 or finish college. To cover a mortgage, choose a policy that will be in place for at least the length of the loan. Depending on your age, you can purchase policies guaranteed for 10, 15, 20, or even 30 years.

In many ways, life insurance is the greatest gift that you can give for your family. It means that even though you are no longer there, you are still providing. That is very powerful.


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