In this article I will discuss the benefits of a little known but very important plan called a family income plan which is also known as family income benefit. I will explain how the plan works and further I will go into how this type of plan can benefit the average client looking for life insurance.

First of all it is important to understand the various needs for life insurance and therefore have a greater understanding of were exactly the likes of family income plans fit within good financial planning.

There is generally only a handful of reasons one would have life insurance. The obvious ones are family protection and loans or mortgage protection. Mortgage protection or loan is quite simple you have a liability of a certain amount of money, so best advice dictates that you should insure exactly that amount in the event of death, and if funds allow in the event of a critical illness. Family income benefit does not cater for mortgage or loan protection for reasons that will be later explained.

Family protection is where family income plans fit perfectly. Family protection is all about making sure that your family or your dependents are adequately taken care of financially in the event of your death. In order to suitably meet this need you invariably have to have a figure to insure, an amount of money that your dependents would need in order to maintain their standard of living in the event that the worst actually happens.

A lot of people tend to use their incomes as a good benchmark to work from when ascertaining what level of cover they actually need. The reason for this is during life you may support your family to the tune of 25,000 for example, so it is fair to say that in the event you die they would need 25,000 per annum in order to maintain their standard of living.

Before the likes of family income plans people only had lump sum insurance plans to to take out as protection. This meant people would have to work out what size of lump sum they needed if they wanted an annual benefit of 25,000. Due to the fact tat they would never know what future inflation or investment returns would be meant this was far from an exact science and again from a good financial planning point of view was a poor and risky way to work.

Along came family income benefit. In short this plan pays out the annual required benefit. So if you wanted 30,000 per annum you took the plan out with that level of sum assured and then if the worst happens the plan pays out 30,000 per annum.

The plan went a bit further to ensure that it did the job correctly, by including something called indexation. This meant that each year the value of the benefit actually increased to ensure that if and the when the worst actually happened the amount your loved ones would receive would be the right amount regardless of how high or low inflation had been. Furthermore once claimed it would continue to rise with inflation making sure that continued to maintain that value from the benefit.

So in summary if you are looking for family protection and it is a level of income you are looking to protect, which 99% of time it really should be, then family income benefit is generally the right plan for you. It will ensure you have adequate cover to protect your family in the event of your death and it will continue into the future with inflation protection as a result of the indexation benefit available as an option within the plan.

Nothing in life can give one the security of knowing that their family is catered for in their absence like life insurance. Life insurance investment is a risk free investment that every person who cares about their family should consider buying. The benefits are guaranteed and unlike other investment options, there is no risk of loss involved. The much that you put in is the much that your dependents will get when you die.

The greatest challenge when buying life insurance investment is determining how much insurance is really enough. Most people think they have adequate life insurance only for the family to be left in debts after their demise because the death benefit was so little it could not meet all the funeral costs, let alone cater for the family’s regular expenses.

To keep your family from going through turmoil after your death, it is important that you buy adequate life insurance.

With a sound life insurance in place, you can help preserve the lifestyle your family is accustomed to living. You can easily incorporate life insurance in your existing investment plan, no matter what your financial status is. Provided you have a regular income, this is very easy. Insurance experts say that an equivalent of ten times one’s annual income is enough to support the family for a number of years after the policy holder’s death.

This means anyone can afford life insurance especially because it is based on one’s level of income.

To find out how much life insurance investment you should buy, visit an insurance website where you will fill out a form that seeks to get a definition of your financial situation. You will be required to input information about your income level, spending habits, regular expenses, projections for future expenses and value of any assets and investments you may have. Factors such as age, gender, health, addictions and participation in risky hobbies/leisure activities will affect the life insurance rates you get.

Life insurance is a necessity for people whose spouses and/or other dependents rely on their incomes. Regardless of the type of insurance you decide to purchase, the payoff goes directly to your designated beneficiaries and is not taxed, so the beneficiaries receive the entire face value of the policy. The two most common types of life insurance are term life and whole life. Understanding the difference between the two can help make the decision about which is best for your situation easier.

Term life insurance is purchased to cover a specific time period, usually not more than 20 years. The premium is set when the policy is purchased and does not change for the length of the term. If the insured dies during the term covered by the policy, the beneficiary or beneficiaries receive payment for the amount of the policy. When the term expires, the policy is no longer in force, and the insured person will have to purchase a new policy.

Generally, applicants for term life have to undergo a medical exam to qualify for it.

The advantage of term life policy is that the premium is usually lower than for other life insurance products. The disadvantage is that term insurance does not increase in value over time, so the premium are simply an expense-it does not accrue to the benefit of the insured. One cannot, for instance, borrow against the value of term life insurance.

On the other hand, whole life insurance policies are issued to cover the entire life span of the insured. The premium for a whole life policy will be substantially higher than one for a term life insurance policy of the same value, but the policy does accrue value over time. If s/he needs cash at some future point, the insured can borrow against the value of the policy.

If the borrowed funds are not paid back before the insured’s death, the dollar amount of the loan will be deducted from the face value of the policy and the balance will be paid to the beneficiary or beneficiaries.

Some of those who purchase whole life use it as one tool in their estate-planning arsenal, because the beneficiaries do not pay taxes on life insurance payoffs. If a person has considerable assets and wants to avoid having some of them tied up in probate or subject to estate taxes, whole life can be a useful option in attaining those goals.

Some companies offer term life policy that can be converted to whole life during the covered term. The premium will increase, but the insured is not obliged to take another round of medical tests to qualify for the insurance.

Insurance services in India offers the protection against external and internal destruction. In India, this concept has become quite common and enveloped the each aspect be it travel or health insurance in India. You require it for all task, each venture, property, and car and development enterprise. Basically in India two sorts of insurance services are common one is car insurance in India and other is health insurance in India. Many time people think that they cannot meet the expense of insurance services however, there are in the wrong at this point, as a large amount of people these days can manage to pay for insurance services in India and should go for insurance.

Car Insurance in India

Car insurance plays a very essential role during purchase of a car. Generally many car buyers are unaware of the importance of car insurance in India.

It covers for damage or Loss to the car against the risk of accident, fire, theft, floods, earthquake, riot, strike etc. In wider terms the Car insurance can be categorized in to two types such as comprehensive policy and third party insurance.

This is the most essential type of insurance which is mandatory in India for all the vehicles. car insurance in India has facilitated several drivers on the road to get ready to face the unwanted mishap. Anything wrong could be happened anytime so it’s better to prepare before then to repent later. Many insurance companies have made their tie ups with the automobile companies to give the buyer a number of options of choosing.

Health Insurance in India

Many time people would give more preference to auto insurance services and usually neglect the health insurance, which is of course more important. Health Insurance in India protects you and your dependents against any financial constraints occurring on account of a medical urgent situation. The Health insurance is available to both individual and groups. However, premium for individual policy is costlier than that of the group policy.

The Health insurance is useful in the situations like from serious illness to hospitalization, physical abuse, trauma, emotional and mental disorders, physical and emotional injuries and accidental trauma. It covers your hospitalization and medical bills and takes guarantee for the care of your family at time of need. The motive of Health insurance is to keep you save from the buying a policy that may not be correct for you and can also be pricey.
 

Advances in medical science have resulted in people living longer. This increase in life expectancy makes retirement planning even more crucial. Furthermore, with better affluence, there is also an increase in demand for a better lifestyle during retirement.

The objective of retirement planning varies depending on circumstances, and normally includes:

- Maintaining a self sufficient pre-retirement standard of living
- Coping with increasing health care cost
- Protection of property and against personal liability
- Providing for dependents
- Estate planning

The process for retirement planning:

Step 1: Overcome Obstacles
Step 2: Determine Goals
Step 3: Measurement
Step 4: Reference Point
Step 5: Overall Plan

Overcoming The Road Blocks

There is only a limited period of accumulation and a continuous period of consumption. The first step is to overcome the many obstacles hindering retirement planning. These include spending beyond means, unprepared for unexpected expenses (like repairs), inadequate insurance (like property loss, medical bills), tapping into retirement funds for other purposes (like upgrading house, holidays), etc.

(1) Aim to save at least 10% of income and gradually increase it to 20% when it is nearer to retirement. This accumulates towards the retirement funds and helps to accustom to a retirement lifestyle within financial means.

(2) Establish an emergency fund of at least 6 months of income that is separate from the retirement planning fund. The will be used for risk retention, covering for unexpected expenses without drawing on the retirement funds.

(3) Have sufficient insurance. A major crisis will be a huge drain on all of the savings, it is best to transfer this risk by being adequately covered.

(4) Saving for other specific purposes should be saved for separately. It will derail the retirement plans due to the shortfall.

Determine Retirement Goals

Depending on the circumstances, the goals will vary from individual to individual. Some common areas to consider:

(1) Lifestyle.
- Housing: Same house, mortgage remaining, upgrade, downgrade, migrate.
- Leisure: Pursuit of hobbies like golf, yoga, charity or religious activities.
- Travel: Overseas holidays, car ownership.

(2) Age of retirement.
- The last day to have to work or the last day to want to work.
- Early retirement due to corporate issues, health, care giving concerns, etc.

(3) Health.
- Coping with increasing health care cost.
- Health screening.
- Dental care.

(4) Estate planning.
- Passing on the wealth eventually.

(5) Caring for dependents.
- Physical or medical care for elderly parents.
- Providing for children not yet independent or siblings requiring aid.

Measuring The Finance Required

From the above goals, the required amount needs to be quantified.

(1) Lifestyle and dependent expenses. An estimate is about 60% of pre-retirement income.
(2) Project the retirement age. The statutory retirement age is 62 years old.
(3) Health expenses. Total up the amount of insurance premiums and health screening cost.

In addition, some assumptions need to be made:

(1) Inflation rate. The average historical inflation rate in Singapore is about 1.5%.
(2) Investment returns. Depending on the choice of investment, this varies significantly.
(3) Life expectancy. A reference will be the natural death ages of great-grandparents, grandparents or parents. The average age is 78 for males and 82 for females, and this average is increasing.

Reference Point

The current position needs to be analyzed so as to determine the strategies to achieve the goals.

(1) Current age. Number of years to accumulate funds before retirement.
(2) Current health. Deteriorating health will be more of an immediate concern.
(3) Financial position. Amount of savings, assets, liabilities, current income, expenses.
(4) Existing plans. CPF, SRS, insurance and investments already in place.

Overall Plan

Depending on which stage on the retirement plan, the approach to adopt will be different.

(1) Accumulation Period
The period when one starts to save for retirement until about 10 years prior to retirement. The focus will be on the shortfall of funds required for retirement form the current reference point. The main strategy will be on saving to invest. Investment will be covered in a later topic.

(2) Transition Period
The period about 10 years just prior to retirement. As retirement draws nearer, the goals become clearer. It is important to review if the desired lifestyle can be achieved with the funds or if more savings is required. The funds accumulated earlier will also need to be gradually repositioned into less risky investments.

(3) Retirement Period
This continues throughout since retirement. The funds will be used to generate current income. Some considerations during this period:
- Purchase of Annuities (CPF Life)
To provide a guaranteed income for life. Recommended to purchase to cover for the minimum monthly living expenses required.
- Maximize use of property
Reverse mortgage, downgrading, renting out spare rooms can be considered for additional income.
- Work
To perhaps work on a part time basis, as a consultant or run a business.

As with all plans, it will need to be continuously reviewed when personal circumstances change (like a newborn or divorce), external market conditions affecting investments, or introduction of new policies (like change of statutory retirement age or CPF rules).

Use of the Present Value and Future Value calculations covered earlier will need to be used to give a better estimate of the amount needed. A simple example:

John Doe in good health, age 40, intends to retire at age 60, current income is $60,000 annually.

Assumptions: Projected expenses at retirement is 60% of pre-retirement income, income will increase 3% annually, inflation is 2%, investment returns is 7%, life span will be till age 80, will carry on to stay at current residence.CPF contributions mainly used for housing and repayment of loan and has not started any retirement plans.

PV = 60,000, 1/Y = 3%, N = 60 – 40 = 20; FV = 108,367.
Therefore, pre-retirement income needed per year = 60% of FV = $65,020

PMT = 65,020, 1/Y = 7% – 2% = 5%, N = 80 – 60 = 20; PV = $810,293
Total retirement fund needed at point of retirement = $810,293

FV = 810,293, 1/Y = 7%, N = 60 – 40 = 20; PMT = 19,765
Amount needed to save per year is $19,765 or $1,647 per month.