Life Cover 101

What is life cover?

Life cover or life insurance is designed to provide for your family when you are no longer there to do so. How? By paying out a death benefit when you die – a cash lump sum that can be used to clear outstanding debts, cover day-to-day living expenses and monthly bills, keep a business going, finance your children’s education, and if necessary, pay for funeral expenses.

Most life insurance includes certain exclusions and waiting periods, for example if you die while you are involved in any illegal activities, or if you take your own life. If you have a pre-existing illness, make sure you check whether your policy excludes any cause of death related to that illness. And remember: If you take part in extreme sports, you may have additional exclusions and your premiums may be slightly higher.

The cover you qualify for is based on a number of factors, including your gender, age, lifestyle habits, income, education and health status at the time of your application. The calculation of your monthly payments is based on these factors as well as the type of cover you choose and the amount you’re insured for.

Make sure you’re aware of any factors that could affect future claims or your monthly premiums. If you change jobs, stop or start smoking, or take up a risky sport, let your insurance provider know as they may need to adjust your terms. If your lifestyle factors have improved, you could end up paying lower monthly premiums.

In short

  • Life cover pays out a cash lump sum when you die.
  • This ensures that your family is provided for when you are no longer here.
  • Make sure that you’re aware of any exclusions that may be included in your policy.

Why do I need it?

Not everyone sees the need for life insurance. And yes, you can take every possible precaution – avoid dangerous sports, try to remove all sources of stress from your life – and hope for the best. Or, you could remove some of the risk by opting for life insurance. It may be helpful to ask yourself these questions at key life stages:

Tying the knot

Getting married is one of the most exciting times in your life. It’s a season for dreaming about your future and planning your life together. 

Q: Will my spouse be financially secure if anything happens to me?

Putting down roots

Buying a home is one of the biggest financial commitments you’ll ever make. 

Q: Will my family be able to afford the bond repayments if I’m no longer here?

Starting a family

The decision to have or adopt a baby is a life-altering one and everything, including your financial responsibilities, changes. 

Q: If I’m no longer here, will my children enjoy the opportunities I’ve always dreamed they’d have?

Starting a business

Going it alone, or with a partner, can be as daunting as it is exciting. 

Q: Will the business survive if one of the partners was to die tomorrow?

Being single

You may think that as a single person, you don’t need life insurance. Think again. 

Q: Will the people I’m financially responsible for (this could include parents or siblings) be financially secure if anything were to happen to me? 

Planning for Retirement

With your children out of home and your bond settled, you may feel there’s no reason to continue your life cover.

Q: Would my spouse be comfortably able to make ends meet, if I died first? 

If you answered NO to one or more of these questions, the simple fact is: you probably need life insurance. Because life insurance will ensure that your spouse doesn’t need to make big lifestyle adjustments, that your children’s education will be taken care of, and more.

How much cover is enough?

Have you ever wondered how much your family would need if anything ever happened to you? Would R1 million suffice or would the final figure be closer to R10 million?

Trying to establish how much life insurance you need is no easy task, but you could start by looking at the type of expenses your family will need to cover – immediate expenses such as funeral costs, medical expenses, and outstanding debt; day-to-day costs which would essentially be a summary of your monthly budget; and future costs such as tertiary education.

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