This is a question that clients ask me all too often – the simple answer is yes: if you have any debt whatsoever or dependents, you need a life cover policy.
A quick Google search reveals that a huge variety of life cover policies are available in South Africa, but which one is most appropriate for you? In general, life cover premiums should be quite a bit cheaper than disability or severe illness cover, making this type of insurance both important and affordable for the average working person.
Benefits of life cover
- It provides your family with money to cover costs that arise when you pass away; such as funeral costs, the executor fee and estate duty.
- It gives your family peace of mind because they won’t have to sell the family home or make sudden changes to their lifestyle when you are no longer there.
- Life cover will allow your family to live the lifestyle they are accustomed to.
- It can also be used to provide a legacy for your children. There could be sufficient life cover for each of your dependents to buy a property or put money in trust for your grandchildren’s education – you could leave a legacy for your family just by having life cover.
How much life cover do you need?
As a financial planner I calculate how much life cover clients require depending on their needs. The amount of cover will vary depending on how many dependents you have, as well as your assets and liabilities – the more debt you have or the larger the legacy you wish to leave, the more life cover you need.
If you have group life cover through your employer, note that this type of policy is taxed before it pays out, which means that your beneficiaries won’t receive the full value of the policy. Private life cover policies are tax free, making them a better option. Also, if your group life insurance is part of your pension fund, the trustees could pay out your dependents, not your stated beneficiaries.
If you are unsure if you adequate life cover or wish to review your current life cover, please send me an email.