Life Insurance
Life insurance is an insurance policy that you take to cover yourself. In case of your death to ensure that your family, and financial dependents are well looked after you have passed on. The death cover is based on your ability to earn income. Your household expenses will also be taken into account. Unlike Funeral Cover which takes care of your funeral costs. The life insurance goes a long way by also protecting your assets by providing liquidity to your estate.
You may make someone a beneficiary of your Life Insurance but that will not provide liquidity to your late estate. The best way is making your estate a beneficiary for your life policy. The executor of your estate then will take care of all due debts. And also late estate debts and SARS claims against your estate. That is why I believe you need a professional to help you with determining life cover shortfall. The professional will help you to make liquidity provision for your estate.
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Data Collection and Analysis
Determining the amount that you might need for life policy can be easily done by your registered and accredited Financial Advisor. Your responsibility is to provide your advisor with all information they ask for. Also the other information you think might be necessary for your advisor to know for financial need analysis. Recommendations that you get from your advisor will be certainly based on data collected. They assume that you have provided them with all necessary information.
You may also need to know how much will be needed by your family should you pass away. All this is done to make sure that your financial dependents will continue to live the same lifestyle even if you are no longer there to provide for them. Some life policies have Education Benefit that will kick in once you pass away. It pays for tuitions of your children when you are no longer there. This is one of great rider benefits that you may need to consider when taking a life cover.
Life Cover vs Credit Life
When you pass on, your executor/s will easily settle your debts e.g. Home loan, Funeral Costs, Master’s Fee, Executor’s Fee, Estate Duty, etc. Your family will have access to your estate residue. It distributed to them within a short space of time unlike when there is no estate liquidity. Then it becomes hard to pay all due debts. Life cover maybe underwritten at application stage to determine the premium amount payable. Premiums are based on the risk clients are exposed to.
It could be work, age, income, education level or their lifestyle. This means at a claim stage your dependents have a higher chance of having life cover pay out without a hassle. As a client, all you need is to read and understand what is excluded by your life cover. Death by suicide within TWO years after taking the policy is excluded in some life insurances. This condition applies in some policies that is why is important to take your time and read terms of your policy.
Some life covers have what they call limited underwriting. This means the insurance companies relies on your honesty and integrity. At a claim stage, they may confirm if all you have disclosed at application stage is actually true. If you hiding some important information. Client may be putting their estate at risk of not getting the cash pay out by insurer.
Credit Life also covers debt but doesn’t not provide liquidity to your estate. That means in this case of credit life, your family will have shelter but if no cash to pays Deceased estate liabilities. The house may end up being sold to make provision for estate liquidity.
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