The benefits of adding beneficiaries to your life cover is to make sure that the right people receive the payout amount. It can also prevent your hard work being left unclaimed for years once you have passed on.
Life insurance gives you the flexibility to choose who you would like to receive the payout, but before you do so there are three things to consider.
You need to have the details of your beneficiaries
Having the necessary details on hand can make the process much smoother when it comes to life insurance. As the main policyholder, you get to choose how many people you want to add to your life cover as beneficiaries who will receive the payout. What is usually required is their date of birth or I.D numbers to list them so that when you die they will receive the payout. It's usually best to inform your loved ones about your policy so that when the time comes they will be able to place a claim, instead of it remaining unclaimed.
You may have to split the cover amount
When choosing to add beneficiaries your insurer will ask what percentage you would like to go to each beneficiary. This is a percentage out of 100% which means if you are insured for R1 million and you have two beneficiaries i.e. your partner and your child, you can select that they each receive 50% (R500,000) or you can split it into an 80/20% or however you see fit. Just keep in mind that should you add more people it will reduce the amount each of them receives.
It could increase your premiums
Adding more than one beneficiary could increase your premiums. Depending on your insurer and the number of people you would like to add, your premium could go up from the initial quoted premium.
Although it may not be a significant increase, it is important to keep in mind if you will be able to afford the premium long term. Therefore, asking your insurer what percentage your premiums will increase by for each year can help you calculate if you would be able to adequately cover the costs of your life insurance premiums.
Having a policy that comes with additional benefits such as disability cover, terminal illness cover or accelerated funeral benefits can make your policy a worthwhile investment that covers you while you are still living. Always check to see if your life cover amount will be able to cover your loved ones by using our life insurance calculator to find out if you have enough cover.