March 31, 2018
What is life cover? Have you and your spouse considered the financial consequence that the unexpected passing of one of you may have on the family? Will you and your children have the financial support necessary to continue with life, unaffected from an economic point of view? If you haven’t considered the impact of not having some form of life insurance, it is a good idea to do some research life cover or life insurance is a financial safety net for a family or dependants should they lose the breadwinner of the family. It provides for current needs as well as for future needs of the insured life’s dependants.
The first and most important reason for taking out life cover is that your family or dependents are taken care of financially should you die. This is especially important if not critically so if you happen to be the sole provider. Imagine, now, when you are still alive, looking at your current budget, with all its expenses, and then just removing all the income. How will any family cope with such a sudden loss? 1
Even if you were a single mother, and you were to pass away, will your parents be able to help? They may for a while, but they can’t always look after their grandchildren as they are getting older too. So, in such a situation, life cover would also be essential.
Monthly payments are made towards the house mortgage. Should those payments dry up owing to the death of a loved one, the bank will not just stand by. They want their funds, so it will mean that the family or dependents who are left behind will have to vacate the house and stay somewhere else. That would be very traumatic, to say the least. This is where life cover kicks in, to ensure that household debts, in general, are taking care of.
In South Africa, several types of life cover are available. 2 The only way you will know which one suits you the best, is to visit an insurance consultant.
The name ‘term’ refers to a specific term or time during which the policy is covering you. This type of cover suits those who only require cover for a brief period of time, such as for 10 or 15 years. When the term is over, the policy is over too. If the insured person should pass away during the term of the policy, the policy will pay out to the estate. 2There are different forms of term policies, including decreasing term and level term cover.
This type of cover does not run for a specific time and is more encompassing covering you for your entire life. It provides for a guaranteed payout. As the insured pays towards the policy, the insurer invests those payments and the policy grows in cash value. Should the insured die, the policy will pay out to the estate. Premiums for this kind of cover are often higher compared to those of term policies. 2
A universal life cover policy is like a whole life policy, except that the insured can also invest. For every premium paid in addition to the normal monthly premium required for the policy, an additional cash sum is added to your policy. With interest earned on those additional sums, fast growth on your investment is possible. 2
It is up to you to decide what kind of cover you would need, and for how long you would be prepared to pay for it. Taking out life cover provides your family with peace of mind, knowing that if the provider of a family unit should die, they will be financially safe.