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Life Insurance: the best tool to protect your family

We don’t like to think of the dark things in life, like disability and death. But at the same time we need to ensure that should the unexpected happen, your family will not suffer financial loss, as well as the grief of emotional loss.

 

There are two main types of life insurance: permanent or Whole life insurance and Term life insurance. The former means you will pay premiums until your death, and term life refers to a particular agreed time span that you will pay premiums, say 20 years, and during which your family will be protected against your loss.

Permanent Whole life policies include a death benefit and cash value accumulation. Term insurance on the other hand, designed to run for a shorter amount of time, presents a more affordable insurance option.  

Key ways in which life insurance protects your family

Death

Should you pass away, your family will receive the insured amount in a lump sum as set out in your policy. This is vital for helping your family to pay off any debt, and for various necessities such as day-to-day expenses such as bills, rates, electricity, telephone, home loan, car insurance, etc. It means that family members will not be put under unbearable financial stress should your income cease.

School and university education

You can arrange for your insurance to be available for the payment of your children’s education. Your children may still have to finish their schooling, and then find their way through tertiary education – so making sure their ambitions and dreams will not come to a crashing halt with your passing, your insurance is one of the most valuable things you can leave your family for this essential expense.

Protecting your business

If you run your own business, it is vital that it is able to continue smoothly if you are no longer there to manage it. So you have to develop a succession plan and the financial support for it. You need to ensure that staff salaries and taxes will be covered, and any costs of finding someone to take your place. Life insurance is one of the best ways to help you secure the continued running and value of your business; insurance is there to cover costs and ensure family members are not forced to carry the business when they can’t afford it.

Protecting retirement income for your spouse

You can set up the lump sum from your term life insurance once it matures, and create an annuity for your spouse which will supplement other income should your salary and pension come to an end. Whole life insurance can also pay out a pension supplement from the cash value which will help your family to cope. The cash value of a Whole life insurance, if allowed to accumulate, will certainly help to increase the pay out of your policy.  

Protecting your family in emergencies

If your policy is Whole life, you will have access to the cash value accumulation in times of emergencies or to alleviate debt. The cash value option allows you to access this money without the restrictions that other investments may carry. However, it is advisable to keep these withdrawals to a minimum as far as possible to ensure that your final pay out to your family is bolstered to the greatest advantage.

Health support

Life insurance pay out to your spouse and family brings peace of mind. The money can be used for education, healthcare, childcare, or assistance with the care of elderly parents. The value and usefulness of life insurance is varied and extremely valuable. It should be part of any financial portfolio. There is a common misconception that life insurance is only useful after a person has passed away, but there are a variety of options you can add to your policy which can assist with chronic or terminal illness care expenses, which is of great help to your family during this trying time.

Paying off debts

This is an important function of life insurance. During your family’s difficult time of grieving and adjustment, the last thing you want is for them to be hounded by debt collectors. This is especially valid for the maintenance of any business that your spouse may have to take responsibility for upon your death. A family business may be vital for providing your family with an income, and insurance is there to help keep staff in place, accounts managed and the wheels of the business turning.

Invariably, when setting up your life insurance policies, you have the future benefit of your family at heart. The fundamental purpose is to lessen financial worries during a time of bereavement. There are many variables and many choices. Be sure to assess all the options because it is crucial to match your choices with planned, long-term goals. But never feel you are alone in your search – make sure you have the guidance of a trusted financial advisor to help you make these important decisions.