Take cover — and make sure it’ll cover all
The money might sound like a lot, but check if it will be enough later
HAVING a will, creating a trust and making sure that your family is taken care of should anything ever happen to you are very important when it comes to financial planning.
So is making sure that your life and disability cover are adequate, particularly if you do not have much to leave behind in assets.
It’s easy to fall for a seemingly large-sounding amount of money, but don’t play guessing games when it comes to the amount of life cover you need.
A figure of R500 000 might seem like a lot of money, but if you consider how much you spend monthly, you will realise that it might not be as large as you anticipated.
Income and disability cover are important, because you never know when you might be unable to earn an income if you become temporarily or permanently disabled.
There are short- and long-term cover options, and it’s worth your while to look at both.
When deciding on your cover, you will need to factor in how many dependants you have and the extent to which they will need financial assistance.
Make sure you include provision for any dependants who have special needs.
Some people are also responsible for extended family members, such as parents. Include their needs in your planning.
Take an honest look at your current level of household income. If you are unable to work, will your spouse or partner cope on their salary plus the income from your insurance payout?
Debt and other investment obligations will also need to be provided for.
Will your cover be sufficient to carry these expenses until they are paid off? If you are paying for a house or car, factor this in.
Parents who have set up education policies for their children need to make provision for the monthly payments into these policies.
It’s important that the cover you choose not only covers all your current expenses but, at the very least, keeps up with inflation, particularly if you are looking at long-term cover.
When you are choosing life cover you need to consider how the payout will be made, particularly if your dependants are still minors and not in a position to take care of themselves. Electing them as beneficiaries means that the payout will be distributed directly to them.
If you have a trust or a will, make sure that the instructions relating to the payout are clear and communicated with your insurance company, the trustees and/or elected executors so that the funds do not end up in the wrong hands, or used for the wrong purposes.
Being honest about your needs and financial situation will allow your financial planner to determine your risk level and, therefore, how much cover is enough.
Think about what will happen in the immediate aftermath of your death.
If you know your family will not be able to cope while your estate is being wound up and your bank accounts are frozen, you need to speak to your adviser so that this is taken care of.
You should also review your cover whenever you make big financial decisions, or when your lifestyle needs change. Your plan must keep up with the progress you’re making.
Be careful not to sign up for any product that is put in front of you simply because it’s cheap, or go for a higher premium because you think it covers everything.
While you want to make sure that your family is taken care of, you also don’t want to end up paying for cover you do not need.
Sit down with your financial planner or adviser and go over all your commitments thoroughly.
Go through your budget and see the full extent of your commitments.