Talking about getting some long overdue stuff ticked off your personal to-do list – when last did you take the time to review your life insurance policy? Maybe your policy is already a couple of years old, and in that time, you’ve been in-between jobs, had a couple of pay hikes, or even got married and added a couple of kiddies to the equation. It’s important that at least once a year you review your life insurance policy and ask yourself a couple of questions that might have a direct bearing on your risk and benefits.
Let’s dive straight into them:
- Has my occupation changed, and have I taken up any new risky hobbies that my life insurer should be aware of?
Maybe you were a manager working in an office environment at the time of taking out your life insurance policy, and now you are a self-employed helicopter pilot, flying with a commercial license because that’s always been a lifelong passion of yours. Whenever you change jobs (or take up any risky hobbies) and this new vocation or passion project puts you at far more danger than the job your life insurer had penciled you in as doing, you need to get in touch with your life insurer to let them know of the new detail.
Your insurer might rerate your policy (charge you a bit more) for buzzing around in a helicopter all day, but you can be safe in the knowledge that at claim stage there will not be any disputes.
- Do you have enough cover in place?
Let’s assume your life insurance policy is approaching its fifth birthday. At the time you bought half a million Rands’ worth of cover. Since then, you’ve had a couple of job promotions, got married, and you have a brand-new house with a big bond attached to it. R500 000 life cover is probably not enough anymore? Every year it’s important that you take the time to consider how much life cover you need. Within this broad question are a bunch of smaller questions you need to answer.
- How much debt will need to be settled if I pass away?
- If I pass away and all my debt is squared off, how much income would my family need every month?
- How many years would that income need to last?
Then if you have company group life benefits at work (linked to your retirement fund), you need to factor that into your equation as well. Sometimes this can all get a little complicated to work out yourself, so it’s always handy to have a useful calculator on hand. Feel free to use our calculator now.
- Do I need other benefits outside of life insurance?
Maybe when you first took out life insurance, all you thought you needed was enough money to pay out to your family if you passed away. But what if you become seriously ill, your medical aid gets exhausted, and you need money to support yourself and your family for an extended period of time? Did you know that you can add Disability and Severe Illness cover to your existing life insurance policy? Disability cover pays out a predetermined tax-free lump sum to you if you become permanently disabled and you are left unable to perform the functions of your occupation.
Severe Illness cover pays out a pre-determined tax-free lump sum based on the diagnosis of a critical illness like cancer. Statistically, 80% of severe illness claims that get paid out from life insurance companies fall into a couple of categories, so when you get a quote, please make sure these are covered:
- Heart attacks
- Cardiovascular disease
Everyone knows someone who has recently been ill, and if COVID has taught us anything, it’s that a horrible illness can literally be around the corner. Make sure you get covered properly because there is a very good chance your private healthcare isn’t going to pick up the entire bill.
- Who have I nominated as a beneficiary?
When you pass away, who do you want the proceeds of your policy to pay out to? This is a very important question often overlooked by most of us when we take out life cover. If you are married, then generally the smart thing to do is to leave it to your spouse so they can use the money to settle debt and invest the rest to generate an income.
If you aren’t married but you have young kids, then you might want to consider leaving the proceeds of the policy to your Estate and have your Will document deal with setting up a Testamentary Trust to protect the money until your kids are old enough to inherit.
These are all very important questions to consider.
Until next time.
The Wise About Life Team