Do I need life insurance?
What is life insurance and why is it important?
Synonyms for “insurance” are:
These synonyms explain exactly what insurance is and why you need to seriously consider having insurance to protect those who are financially dependent on you.
Why you might need Life Insurance:
You need Life Insurance if anyone is dependent on your income to take care of their basic needs. Often this will be minor children who are still at school and are not self-sufficient yet but it could also be your spouse or your parents.
You need to choose life insurance that you think will work best for you and your needs. Your Life Insurance premiums (how much you pay every month) depend on how much you want to be insured for as well as your age, general wellbeing and health and risk profile. If you are 55 years old and suffer from a heart condition and want to ensure your life for R1 million, your premium will higher than if you are 30 years old and fit and healthy.
What should your Life Insurance payout be used for?
When you die, your family will be grieving and in shock. You don’t want them to be worried about living expenses, funeral expenses and how they will survive financially now that you are no longer there. However, the money is limited and you want them to use it in a responsible way so that they can be financially secure for as long as possible. As with any other lump sums it is important to have a plan in place and to know what expenses need to be covered.
The money can be used for the following expenses:
- All final and funeral expenses not covered by the funeral policy
- To cover all children’s expenses
- To cover a spouse’s income
- To settle a bond
- To pay off debts
Why you need Disability Insurance:
Disability income insurance is insurance that replaces your income in case you are unable to work in your own or a similar job because of an accident or illness. Your monthly premiums will depend on the available benefits for individual coverage, how much you want to be insured for and your personal risk profile. Disability insurance generally pays out a lump sum and/or monthly payments to the beneficiaries. However, this will depend on your personal policy.
It is important to keep in mind that you still have to budget. If your policy pays out a lump sum, spend only what you need and invest the surplus wisely so that you are financially secure for as long as possible.
Important information to remember:
- You have to be completely honest and disclose all relevant information when you take out an insurance policy.
- If your circumstances change you need to inform the Insurance company. For example, if you move to a different job that carries a high risk or if you start smoking.
- You need to make sure that your beneficiaries are up to date. If your circumstances change, your beneficiaries might change.
- You have to pay all your premiums. If your policy lapses it will not pay out. You take out Life and Disability insurance to protect yourself and your family against a loss of income. The last thing you want is for your insurance not to pay out because of one of the reasons above.
Think about these questions:
- Do you have ‘Life Insurance’? Why?
- Do you know what your ‘Disability Insurance’ will cover?