Life insurance: dos and don’ts
ENSURE: DON’T ASSUME YOUR PROTECTION IS ENOUGH
Read the fine print and get the cover that works for you.
what that figure should be,” says Alexander Forbes’ Rudi Schmidt.
There are many online tools that help calculate what’s enough; your financial advisor should also be clear on how they reach their proposed figure.
For death and disability cover, this generally means paying off your debt and having enough cover to generate an ongoing income.
“Severe illness cover is however often a more subjective assessment of what you want extra money for. Maybe your medical aid won’t pay everything, or perhaps you will need to change your lifestyle, or take time off. You have to weigh up these needs based on some objective calculations, but also your individual risk appetite and affordability,” says Investec Life’s Michael Goemans.
Don’t rely on group cover
Many people working in a corporate environment will have some level of life cover through their company. Don’t assume it’s all you need.
Firstly, some of these policies only cover death, not disability or serious illness. Also, most people are likely to change employers a number of times during their careers and they don’t retain their cover.
“Your level of group risk cover will vary with every employer, so I always look at group risk cover as supplementary,” says Schmidt. “You should never make it your core or fundamental cover in financial planning because it is not sustainable and varies through your life.”
Group cover policies can take up to a year to pay out. Direct life insurance will pay out in a week.
Avoid non-underwri en products
Plenty of funeral and accidental death cover policies market themselves on not requiring medical examination. However, this kind of cover is far more expensive than a traditional life insurance policy.
Get cover on your terms
Most people who have life insurance have a policy because a broker told them. However, greater awareness and the use of technology are giving more influence to consumers in this process.