Life cover a must for all breadwinners
Survey shows middle-class not covered
Over half of South African parents earning between R12 500 and R30 000 a month have no life cover in place. This is according to a recent survey of 1 000 South Africans by CompariSure, a new independent online life insurance comparison platform. Jonathan Elcock, founder and chief executive of CompariSure, explains that life insurance is about protecting your purchasing power on all the expenses you would have covered over a 40-year career, if you suddenly became unable to earn this income due to death or disability. According to Elcock, the survey found that 53% of respondents who were parents had not made provision to care for their families in the event of death or disability.
The exception, he says, is funeral cover. Given the cultural significance of funerals, many South Africans have funeral cover but nothing else.
The cost of no cover
The other event for which you need cover is your death, particularly if you are your family’s breadwinner; debt, such as your home and car loans; education for your children; and significant taxes, such as estate duty on your home. Elcock says the amount of life cover that you need depends on your specific circumstances. At your death, your family would need to pay for all the living expenses such as groceries, rent or monthly bond repayments, insurance premiums, medical scheme contributions and transport. There may also be additional expenses, such as nursing care for you if you are critically ill or become disabled, or additional childcare costs.
Bills don’t pass away with you
Debt such as car and home loans still need to be paid, even after your death.
Your family will be saddled with that debt if you pass away, therefore, life insurance pays off any outstanding debt you may have.
Education is expensive. If you die before your children are educated, life insurance can ensure they get the education you would have wanted for them. “Responsible parents want the best education for their children, so they leave nothing to chance should they pass away,” Elcock says.
If your net worth (assets less debt) is more than R3.5m, your estate will be liable for estate duty. The executor of your estate is obliged to settle this tax before any inheritances can be distributed.
How much do I need?
The amount of cover that you typically require for estate duty is calculated as: (Net asset value – R3.5m) x 20%.
So, if you have R13.5m in cash for your dependents, you will have to pay R2 million in estate duty. If you have life insurance, some of the payout can be used to cover this debt. CompariSure has created a simple online comparison that will take you through the process of cover that you need and suggest a reasonable amount based on your current personal and financial circumstances. CompariSure will then provide you with estimated life cover quotes from Old Mutual, Sanlam and Momentum. CompariSure is in discussion with other insurers to extend the number of life insurance quotes provided.
The online comparison that CompariSure provides to you includes the cost of estimated premiums from three life insurers (Sanlam, Old Mutual and Momentum) broken down into the premiums for death, disability and critical illness covers.
As different insurance companies have different premiums for different risk profiles, chances are one of them could come out best for you. Elcock adds that this quick quote is refined after the agent takes into account further details, such as your specific needs and budget. “Many people want to be responsible and may only have a few hundred rands for life insurance cover. Financial constraint is a reality, but some cover is better than no cover at all,” says Elcock.
Some cover is better than no cover at all