Life insurance provides a dependable source of financial protection for you and your family in the event of your death or if you become ill or disabled and unable to work. Here’s what you need to know before deciding on your right level of cover.

Speak to a professional

To establish how much cover you need to protect your loved ones and to help make sure that you can afford to keep paying the premium, speak to an accredited financial adviser or reliable life insurance broker.

Types of life insurance

As a resident of South Africa, you’ve three types of life insurance policies to choose from:

    • Term life insurance. This standard policy covers you for a set, predetermined period. It’s a good policy to have if you need insurance for a limited time, such as 10, 15 or 20 years, while paying off your home loan, for example. These policies tend to be very affordable but don’t have any cash or investment value once you’ve paid the policy off. In other words, the coverage ceases to exist at the end of the term. If you should die during the term of the policy, the policy will pay a lump sum to your beneficiary.
    • Whole life insurance. You pay on the policy from the day you invest in it until the day that you either die or surrender the policy. The policy builds up cash value because part of your premium goes into an investment. You never have to worry about whether or not your health causes you to become uninsurable. Upon your death the policy pays out to your beneficiary. Once you’ve paid on the policy long enough to earn a cash value, you can borrow money against the policy. Premiums for this type of policy are usually higher than a term life policy.
    • Universal life insurance. This popular type of policy is a whole life policy with an investment option. For every premium payment you make above your monthly premium, an additional cash amount is credited to your account and you earn interest on that cash amount each month. This type of policy offers you a possible rapid growth on your investment.

You need to meet with your adviser regularly to review and update your policy as you go through your various life stages. When discussing your options, ask your advisor about dreaded disease cover, disability cover and income and education protection.

 

Sources
www.discovery.co.za
www.insuranceexplained.co.za
www.moneyadviceservice.org.uk