Life Insurance 101

Everyone has an opinion on life insurance: It’s a necessity; some people need it, others don’t; the sooner you get it the better; leave it until later… If you’ve been considering buying life insurance, but haven’t a clue where to start, keep reading…

Aside from being something most of us prefer to avoid talking or thinking about, life insurance is designed to support your family financially when you’re no longer in the picture. And it does so by means of a once-off cash payout, which your beneficiaries can use to settle any debts you may have left behind, cover living expenses, pay for education and any other expenses that might arise.

How much cover will you qualify for? This is determined by several factors. The list includes your gender, your age, your education and income, the type of lifestyle you lead and the shape your health is in when you apply. These factors, together with the level of cover you choose, will determine your monthly premiums.

What about exclusions? Typically, life insurance policies include certain exclusions that range from dying while participating in an illegal activity to taking your own life. And don’t forget that some policies may also include waiting periods.

If you suffer from a pre-existing illness, make it a priority to find out if the policy you’re considering excludes any cause of death related to your illness – and declare it upfront. Plus, if you make any changes to your lifestyle, for example kicking your smoking habit or taking it up (not a good idea #justsaying), or start launching yourself out of a plane with your new skydiving buddies, to give your insurance provider a call as they may need to adjust your policy and premiums.

The good news is that if your lifestyle has improved – you quit smoking, stop participating in dangerous activities or you don’t travel to certain countries any more – you could end up saving a few rands every month.

Tip: Honesty is key when taking out life insurance and it’s up to you to make sure that you are aware of anything that could affect your claims or monthly premiums.

Maybe you don’t think you need life insurance. The fact is, you probably do. And yes, even if you’re single or a stay-at-home parent. Life insurance will ensure that your family’s finances are taken care of now and in the future should anything happen to you, giving you peace of mind to enjoy the present.

Hooked, hitched or hatched
Getting engaged, tying the knot and welcoming junior to the family – these are the major milestones that typically send us heading (or in some cases sprinting) to the nearest financial advisor for advice. And the truth is that as your family responsibilities increase, so do your financial ones, so it makes sense to think about what would happen if you were no longer around to support them financially.

Buying a house
This is no small move. Buying a home is without doubt one of the biggest financial commitments you’re ever likely to make and taking out life insurance ensures that your family can enjoy it no matter what your future holds.

Being single
“I’m single, so I don’t need life insurance.” Are you sure about that? If you’re financially responsible for someone, whether it be a child, parents or sibling, or you have someone standing surety for you on your home loan, it doesn’t matter whether you’re single or married with four kids, you should still be giving life insurance some serious consideration.

Heading towards retirement
The kids have flown the nest, your home loan is all but done, no need to keep paying your monthly life insurance premiums, right? Here’s the real question you should be asking: What would happen if you were to die before your spouse? Would they be able to cope financially without you? If the answer is no, keeping your cover going is probably your wisest move. Bear in mind that you can usually only take out cover before you turn 65.

That’s the million-dollar question, isn’t it? So, how do you decide whether R200 000 or R10 million will be enough to keep your loved ones living the life they’re used to once you’re gone?

A good place to start is to look at the kind of costs your family may be facing: 

  • Immediate costs – medical expenses, debt, funeral costs
  • Monthly costs ­– food, utilities, rent or home loan, school fees (it’s a long list) 
  • Long-term costs – tertiary education, your daughter’s wedding, a car for your children

Once you’ve arrived at a figure (hopefully you’re still standing), you should have some idea of the kind of policy you’re looking at.

Tip: Always remember to account for inflation when doing your sums.

FRANK.NET offers a tax-free life insurance payout of up to R10 million with unlimited beneficiaries.
Keen to find out more? Get a quote or let us call you back.

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