According to online resources South Africa is the sixth most dangerous country in the world to live in. It is also no secret that we are challenged as a country with life threatening diseases like HIV/ AIDS, and probably one of the most underrated illnesses, obesity. Our roads are dangerous and it is also a fact that younger generations are these days confronted with cancer, high blood pressure and diabetes. Surely it makes sense to have proper life insurance if you have significant debt, or dependants totally reliant on you?
Why do some people not have life insurance cover? Is it because it is the most intangible of all insurance products and that many people find it difficult to accept and understand the advantage of paying for something which does not offer any immediate benefit? Have you ever considered the following, in the event of your demise:
- who will take care of your family?
- how will your family manage without your monthly income?
- if you have an active bond, will your family be able to keep the property or will they end up without a roof over their head?
- will there be enough money to cover funeral expenses, executor’s fees and estate duty?
- if you are indebted to a business, will your heirs be able to settle the debt without being crippled by your financial obligations?
South African residents have two types of life insurance policies to choose from, each with its own different variants:
Term Life Insurance
This type of policy covers you for a set, predetermined length of time. The policies can typically be purchased for ten, fifteen or twenty years and work well if you feel you need coverage for a short or limited period of time eg until your bond is repaid, or your children have been educated. Should the insured die within the covered period, the policy will pay out the insured amount to the estate of the deceased. Term life insurance is the least expensive way to purchase substantial death benefit over a period of time. Term life insurance can further be specified as Level Term, Increasing/Decreasing Term, Renewable Term, Convertible Term or Group Term. These policies generally have no surrender value.
Permanent Life Insurance
This is a more comprehensive life insurance policy and offers you a guaranteed payout. The insured invests his/her premiums from the day of investment until the day they die or until they surrender the policy. Upon death, the policy will pay out the investment to the estate of the deceased. Permanent Life Insurance can further be categorised into Traditional Whole Life cover, Variable Life Insurance or Universal Life Insurance. The Universal Life Insurance Policy is a most interesting category where the policy is a whole life policy with an investment option. The insured has the option to make a payment to the policy which is higher than the monthly premium. The additional investment is then credited to the insured’s account. Interest and growth is then earned on the amount.
Life insurance may sound excessive, but think about the consequences of your death. Your survivors will be dealing with the loss of a loved one and adding financial stress to the situation will make matters worse. Ensure that you are adequately covered for the day that you are not there anymore.
Should you need our advice or assistance in finding a suitable financial advisor please do not hesitate to contact Meredith Harington.