How do I know what cover I need and how much I need?
Okay, so there really isn’t a short answer for this one, so if you’re interested (and you should be since it’s about your money), then read on...
Why is it that different companies would propose different amounts to cover your needs? Some even propose more than you could ever afford 😮 or what they would offer! The reason is that they try to calculate the once-off amount you should have in order to make up for the future income you would lose if you died or become disabled.
We have some of the brightest minds 💡 in the insurance industry working for us and they don't even want to attempt to calculate this once-off amount 😰. There are so many uncertainties involved that it becomes a very difficult thing to calculate accurately.
If you want to replace an income stream that you might lose in future, the best replacement for this is actually not a once-off amount (that is extremely difficult to calculate), the best replacement is an income stream. If it doesn't sound like rocket-science 🚀, you are correct because it isn't. But still, this hasn't dawned on many providers. Our method can be summarised in two easy steps:
1. We propose that if you have needs for once-off expenses (settling debt, paying for a funeral, making adjustments to your home, etc.) they should be covered by benefits that pay a once-off amount. And the amount should be roughly the same amount as the once-off expense.
2. If your need is to replace an income stream (the income you would have earned if you didn't become disabled or the income that would pay for the living expenses of dependents if you didn't die) they should be covered by benefits that pay an income-stream.
In other words, the benefits should match the needs. And the amount should be enough to leave you or your dependents with the same amount you currently earn after tax and after debt repayments. Voila! 👨🏼🎨Financial planning that makes sense.