"Life insurance": two words that hold a lot of weight, yet almost never seem to get brought up in conversation. Death is a daunting concept that many people tend to brush over, meaning that life insurance is a financial tool that people choose not to think about. However, life is unpredictable and the future is always uncertain, so one hard conversation now could lead to a massive relief for your loved ones later, if anything bad were to happen to you.
What is life insurance?
Seeing as many people avoid thinking about life cover altogether, it is often misunderstood. Life insurance or "life cover" is a financial tool that aims to provide support and stability to people, when someone of significance in their lives, passes away. Life insurance pays out a lump-sum to the policyholder's beneficiaries, who are predetermined and stipulated in the policy document. The amount paid out is also predetermined, and is paid out in order to help the beneficiaries cover any living expenses, pay off any excess debt and save or invest for future goals. This lump-sum amount is essentially used to cope with the sudden loss of your income, and it ensures that your family is still able to live the life you had planned for.
How does life insurance work?
When you become a life cover policyholder, you begin to make regular payments called "premiums". These payments are the same amount and typically are paid on a monthly basis. In exchange for the premium you pay, the insurer promises to provide you with a payout, in the event of death. The payout amount is predetermined and is dependent on the amount of cover that the policyholder selects.
Different people qualify for different payout amounts, based on their risk profile. A person's risk profile is determined by factors such as age, health, monthly income, marital status, lifestyle habits, and so forth. If a person is at higher risk, they qualify for a lower payout, and vice versa. The policyholder decides who will receive the lump-sum payout.
Life cover vs funeral cover: what's the difference?
Funeral cover and life cover are often confused, however the two are not the same thing. Funeral cover is a payout in the event that someone (the funeral policyholder) passes away. This payout covers the immediate expenses following someone's death, such as burial or cremation costs, memorial service expenses, etc. Life cover's payout aims to support beneficiaries with medium-to-long term expenses, not immediate financial burdens.
When and why you should get life cover
We get it, death is scary and humans avoid the topic like the plague, but life cover is a financial tool that every person should consider, especially if you are someone who has other people relying on you in some way. If you are an individual with dependants, with financial responsibilities or with debt that has yet to be paid, life cover is a safeguard for your family's future, should anything go wrong.
When you are deciding whether or not to get life cover, and how much life cover to get, it is recommended that you discuss these considerations with a financial advisor, in order to choose an amount that is specific to your financial needs and your unique life situation. It is important to remember this, as using someone else's insurance plan, will not always yield the most optimal financial plan for you.
With Simply's life cover, offered as a benefit under all of our long-term product options, you can receive life cover in minutes, and online, via our digital sign-up process. No blood tests or medical exams are required, just internet connection for you to answer a series of questions. We believe that life insurance is a tool that should be accessible to everyone, which is why we've made our solution fully digital.
Simply Financial Services (Pty) Ltd is a registered financial services provider (FSP 47146). T&Cs online.