Life insurance is a term that we are all bound to come across, but what does it mean, and how can it work for you?
Is it something that you can use while you are still alive and how can you navigate your way around finding something that will be beneficial for you and your loved ones. Our ultimate guide breaks down everything you need to know about life insurance.
What is life insurance?
Life insurance is a policy that pays out a lump sum to your loved ones who are listed as beneficiaries to take care of everyday life expenses. Policies can range from a minimum of R50,000 to R10 million in South Africa. It is also created to take care of major life changes that can happen in your life such as death, being diagnosed with a terminal illness or disability.
However, it is important to note that not all policies are the same. While some insurers can offer a life insurance policy that comes with a built-in funeral cover to help you cover two things under one premium, other insurers may not offer this.
You can use a life insurance payout to take care of things such as:
paying off a home loan
everyday living expenses
terminal illness medical bills
modifying your home and more
Why do I need it?
Life insurance is a safety net that we all need, especially when it comes to protecting those we care about. If you are someone who is planning on buying a house, having children, getting married or simply looking to make a charitable donation to the less fortunate at some stage of your life, having life insurance is vital.
It is designed to grow with you, which is why it is better to get it while you are still young and the premiums are affordable. You can make changes to it as you go by adding your beneficiaries at a later stage to keep it up to date.
How much does it cost?
Taking out a policy that will be valuable to you and your loved ones boils down to getting something that is tailor-made for your needs. Looking at your current expenses along with future plans that you may have such as paying off your debt, buying groceries, saving for tertiary education, purchasing a home, or introducing a new member to the family are things that need to be considered. You can apply for an obligation-free quote to see just how much you could be paying.
How are my premiums determined?
If you are wondering what insurers base their premiums on, you will find that it is straight forward. Life insurers use the underwriting process that uses your age, health, and lifestyle to determine what premiums you will be paying. Therefore, it is equally important to get life insurance while you are still young.
Most insurers offer cover that starts at R1.5 million and can go up to R5 million for as little as R149 a month, which is the equivalent to the price of a pizza.
However, checking the premiums for your policy along with the increase that comes with it per annum or every 5 years is important. This can help you budget accurately for it and avoid cancelling it because of its affordability.
When does a policy payout?
Your loved ones can place a claim on your policy as soon as you pass away. However, knowing what is needed when placing a claim can make the process less daunting. This can differ from insurer to insurer, which is why it is important to check your insurers claim process to avoid any frustration.
Your insurer will then assess the claim and check that everything is in order to avoid any fraudulent claims. The time frame can vary from a few weeks to months based on the information that is submitted and the investigation on the insurer's side.