Why you should never skirt the vital issue of Life Insurance
Life insurance may not be a particularly pleasant topic of conservation but ignoring it is far more dangerous. Life cover is the first step towards a successful financial plan and is an absolute must for young up-and-comers. You simply have to ensure that your loved ones are looked after if the unthinkable happens.
It’s a no-brainer
If you’re young and have debts and a family to take care of, life cover is simply a non- negotiable part of your budget. (Assuming you don’t have sufficient capital to maintain your family should you pass away.) Life insurance is designed to protect your family from the premature loss of your working life’s income and free them from financial worry after the turmoil of your death.
The amount of life cover you need is based on your real life circumstances which include:
- debt (including your mortgage)
- the capital your dependents will require to sustain their lifestyle
- estate duty (unless your spouse is your beneficiary)
Once you’ve reached your twilight years your investments and retirement savings should be sufficient to assure a comfortable life for you and your spouse. (Provided you’ve been diligent in your financial planning.) That said, it may still be worth keeping the policy if the premiums are low in comparison to the payout amount.
Apart from the lump sum payment on your death, there are other components to comprehensive life cover. These include:
Severe Illness Cover
This will provide you with a lump sum payment if you’re struck by a specified critical illness such as a heart attack, stroke or cancer. The lump sum payout could be used for various needs such as medical costs not covered by your medical aid or the cost the of a caregiver. In fact, most life cover claims are for severe illnesses. The money is paid out as soon as illness is diagnosed and there is no need to prove loss of income.
Whatever you do, don’t think of this as a replacement for medical aid rather as a means to facilitate lifestyle adjustments (such as going away more often to reduce your stress levels) which will increase the likelihood of your recovery.
Income Protection Cover
An income continuation benefit pays you a salary if you become severely ill or injured and are no longer able to work. This will assist in maintaining your lifestyle including the ability to pay education fees, contribute towards your retirement fund(s) and to keep up debt repayments…And in doing so hold on to your good credit rating.
Capital Disability Cover
This provides you with a lump sum if you become disabled. It allows you to cover any costs associated with your disability which may include adjustments to your home and car.
Education protector
A good education is by far the best gift you can give to your children and protecting it is of paramount importance. An education protector assures that your children’s education will be provided for if you become ill, disabled or pass away.
Be in the know
When you apply for a life cover policy, you’ll need to undergo medical tests to determine whether you have any pre-existing conditions, such as heart disease or high blood pressure. Generally, the policy will not be paid out if your death or illness stems from these conditions – but remember, this doesn’t preclude you from cover. There are, unfortunately, many different ways to pass away, including car accidents.
Some people avoid life cover because they’re afraid of the initial medical results. This isn’t just financially foolish, it could also prevent you from finding out about an important medical issue. It’s always best to be in the know and get the cover you need.
A word of warning
If you have life cover as part of your employment package, be sure to check it carefully. Company benefits packages often roll a few benefits onto one and the life cover portion may not be sufficient.
Risk is great…Up to a point
Young investors, who still have time on their side, can handle a fair amount of risk in their portfolios. But no-one can take the risk of leaving unpaid debts and a financially insecure family behind. Speak to your Kanan Wealth adviser to ensure that your cover is sufficient, taking into account your debt, the financial needs of your dependents, and whether estate duty will be payable on the amount.
Kanan Wealth is an independent life assurance broker and we’re not tied to any life assurer. We’ll ensure you get the cover you need from the most appropriate supplier. And we’ll help you to fully comprehend the policy.
