Life cover. It’s tempting to write it off with an eye-roll emoji, but the truth is that it should be part of your financial plan. Most of us don’t like thinking about death, let alone planning for it, and paying each month towards covering expenses in the event of your death…well, that just seems ridiculous!
But it’s not ridiculous, especially if you have dependents like a spouse and children. If you suddenly pass away, who will keep putting food on the table? Who will pay the balance of your home loan? Yup, your life cover will. It will help your loved ones with day-to-day expenses and assist in paying off outstanding debt. It will also cover funeral expenses and any estate duties, relieving the financial pressure on your family during a difficult and traumatic period of time.
So, how much cover do I need?
It depends on your family situation and your lifestyle, but the rule of thumb is that you should be covered for at least 10 to 15 times your annual income. In other words, if you earn R200,000 a year, you should be covered for at least R2 million. Other factors to take into consideration include the amount of debt that would need to be paid off (home loan, vehicle finance etc.) and whether or not you are the main provider in your household.
Make sure you stay adequately protected
As the years go by, your income, expenses, and lifestyle might change, resulting in your original life cover amount no longer being adequate. With this in mind, you should review your cover at least every three to five years, or when there’s a major change in your life like having a child or getting married.
Life cover is like the see-saw in the playground — you don’t want to be underinsured and leave your family in the lurch, but you also don’t want to be overinsured and pay an unnecessarily hefty premium each month, which could be put to better use paying down debt or topping up your emergency fund. There’s usually a sweet spot somewhere in the middle, where the see-saw is perfectly balanced. If you’re struggling to find that sweet spot, consider asking a professional financial planner to help.
Shop around
As with many other core financial products, there are dozens of life cover options on the market, from all the major banks and other financial institutions. Many offer incentives like cash-back schemes, or discounts on linked products like short-term insurance and medical aid. Take the time to shop around and look at all your options. Put Google through its paces and make sure you choose a product you’re comfortable with.
