Life Insurance

Aug 7, 2019

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Life is full of surprises and not all of them are good surprises. What happens to your family when you are no longer there to look after them? If you are the sole breadwinner or your income helps keep the household going what will happen when you can no longer provide for them due to death? Have you ensured that they will be taken care of? Here are some things you need to keep in mind.

Types of life insurance:

  • Term life Insurance: This cover is offered at a fixed rate for a temporary period. If you pass away during the selected period, your beneficiaries will be paid out.
  • Whole life insurance: This offer is lifelong coverage and includes an investment component. This means you will receive a lump sum payout if the policy is cancelled. If you pass away, your beneficiaries will receive the lump sum payout.

Factors that influence your premium:

  • Age: Generally cheaper when you are younger and healthier;
  • Health: If you are overweight of have any pre-existing health conditions, the premiums could be higher due to your risk profile;
  • Smoking: Premiums are higher, but most Life Insurance providers will reduce the monthly premium if you quit;
  • Profession: If you are in a dangerous profession then your risks and premiums are higher; and
  • Lifestyle: If you have dangerous hobbies like extreme sports or scuba diving then your risks as well as your premiums are higher.

What you need to take into account:

  • Any assets, liabilities and estate costs;
  • How many dependents you have;
  • How much you want each dependent to receive; and
  • Any school fees, bond payments, home bills (any factors that make up your life).

Need to know

  • Make sure you get cover to suit your needs, don’t buy something you can’t afford and won’t use;
  • Don’t rely on group cover: Most people change employers several times in their career and you won’t be covered if you are not still with the company. See it more as an add on rather than a main source of life insurance;
  • Be sure to read and understand the fine print in your policy;
  • Review and update your policy to determine whether any amendments should be made and that it is up to date;
  • Be sure you check and understand the difference between amount insured and what the payout amount will be;
  • Discuss with your advisor how the amount will be paid – either a lump sum or several payments;
  • Life insurance is not an investment but rather ta risk management tool, so treat is as such;
  • Be wary of non-underwritten cover as they cost more than normal life insurance but don’t usually include as much, unless you cannot get life insurance; and
  • Make sure to plan ahead, think of how much the insurance will help in 20 or 30 years, so do some research on whether fixed premiums might be better suited for you.

Disclosure

Always disclose any changes that take place such as; address, occupation, hobbies, illnesses as soon as possible. Claims can easily be turned down if you have undisclosed health issues, what can also happen is they can refuse your claim even if your death is unrelated as in the case of Momentum last December. (Hijacking victim’s claim was refused due to an undisclosed high blood sugar level). Ne aware of any exclusions and waiting periods on the policy you take out. Exclusions are usually condition specific, but the most common ones are back, neck, spine and mental health issues.

Refusals

Here are some of the reasons your claim might be refused:

  • You have unpaid premiums;
  • You have an undisclosed condition/symptom like high blood sugar (it is an early sign of Diabetes);
  • You did not take the advice of professional healthcare when you got ill;
  • You were the cause of your death (cases of suicide); and/or
  • You were involved in any gang, terrorism or otherwise illegal activity.

Trust

Life insurance can also be bought through a trust but insurers are quite strict so it needs to have two separate bank accounts, all trustees must agree and sign the documents etc. Speak to a financial consultant for more information on how this can benefit you, also do your own research to make sure it would suit your needs.

Keep an eye out for the rest of our insurance blog posts.

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