Life insurance is not usually a hot conversation topic. It’s rather like a vaccination – you know you’ve got to have it, but you don’t bother to talk about it. And yet without it, your family could face financial ruin. Like brakes in a car, it’s essential to have – and yet many people don’t investigate it as they should, or understand the implications of their chosen cover. And labouring under misconceptions could cost you dearly.
The biggest misconception: thinking your employer’s life insurance is all you need
- When you take out a life insurance policy with your family in mind, you should be looking for cover that will, in the event of your death, make up for the lack of your income, send your children to college, and provide a retirement fund for your spouse.
- While a salary package which includes the benefit of a life insurance cover is nice to have, it is often unlikely to present the full coverage you may need for your family at the time of your death. Your loved ones have to deal with medical bills, funeral bills, and maybe even debts and a mortgage. Your employer life insurance offering might not cover that. Wise people carry private insurance to cover the shortfall.
- In addition, employer coverage should be considered temporary coverage. When you leave the company, your coverage will cease. However, you can check to see if you can take your insurance with you at affordable rates, preferably one that will stay with you no matter where you work.
- If you are young and healthy you could probably personally organise a good insurance for possibly less than you’re paying to the company. In this way you can purchase an individual policy that locks in your rate for a period of time, or allows you to build cash value if you want to keep the policy your whole life.
Other common misconceptions
Overlooking the fact that both spouses need insurance cover, not only the breadwinner
Many people think only of themselves with regard to providing for their families, forgetting that their partner’s value also might need to be replaced with household help or nannies, and that taking time off work will be required to deal with domestic issues.
Thinking you can’t afford life insurance
Don’t underestimate the realities of life, and the unexpected costs unfortunate circumstances can bring. Initially, giving up a portion of salary income for the purchase of life insurance may seem onerous, but it is a valuable investment. Whether you have chosen term life insurance for a specified time span, or whole life insurance ongoing for your whole life, today’s policies can be individually crafted to suit your circumstances and financial commitments, and you will always keep control.
Thinking purchasing insurance online will save you money
Not necessarily. Purchasing a policy online or through an agent works out at similar price. And online does not provide that vital ingredient, personal service. When purchasing something that has such an impact on your life, you need to discuss issues such as: how much you need, which company is likely to give you the best price based on your health situation, and what the terms on the application mean. An agent can help you move forward by guiding you through a minefield of information.
Thinking you’re too young
Actually this is never the case. The younger you begin, the less expensive the premiums. And there is a danger that you will leave things too late and be unable to get any coverage at all. Life insurance gets more expensive as you age; you might find in later years that you have a family and no coverage, whereas if you had started young, you would be in a very good position by your middle years. The younger you are, the better it is to ‘seize the day’.
Thinking you don’t qualify for life insurance
Life insurance isn’t only about family. Those that have no children tend to think that there’s no reason to carry it. But certainly access to an emergency lumpsum can come in handy, and should you die there are always issues that may need to be dealt with, such as: personal debt, medical accounts, funeral expenses. You can even name a good cause or charity as your beneficiary. And if you have a spouse, partner, friend whom you would like to name as beneficiary, it’s worth the effort. If your income was shared with another, the loss of that money could be problematic – a life insurance fixes that.
Thinking you don’t qualify if you have ill health
This is another key misconception. There are many companies and policy choices to suit people in every circumstance. There are some who even specialise in high-risk groups. Your monthly premium will be higher than that of a healthy person, but coverage is vital for you if you have a chronic or life-threatening condition. But you must be honest about your health when you sign up.
Check your policies, check your life
VeriFi is an online tool that provides you with an immediate and up-to-date overview of all your life insurance and investment policies by sourcing information from all the major life insurance companies – and presenting the information in a comprehensive report.
With VeriFi you are able, for no charge, to access information on all your life and investment policies at a glance. You are able to check the types of policies you have, the names of the insurance companies providing the cover, the nature and extent of the insurance cover provided – and other vitally important information such as the details on your policies being correct.
To find out more, please visit: www.verifi.co.za