Types of Insurance Policies in South Africa

South Africa is known as a rainbow nation due to its diversity. The country is full of millions of people who have different needs and dependents. Here we will cover the different types of insurance policies in South Africa.

It is quite difficult in a country as big and diverse as South Africa to have a single type of insurance policy that fits and suits the entire population.

The one size fits all rule does not apply to the South African life insurance industry.

In South Africa, there are three types of life insurance policies, namely whole life insurance, term life insurance and universal coverage.

Each of these insurance types is suitable for different people depending on their affordability, needs and how much cover their dependents will need in the future.

Term life insurance – Types of insurance policies in South Africa

Types of Insurance Policies in South AfricaTerm life insurance is the most basic and simplest type of life insurance. It is the first form of life insurance. It is easy to understand and does not pose many difficulties when a policyholder wants to cancel it.

Term life insurance allows policyholders to buy a decent death benefit cover without paying high premiums. This makes a term life insurance an inexpensive way of having a life insurance.

A term life insurance is not a permanent insurance plan. A policyholder can purchase if for a fixed term such as five years or ten with the option of renewing when the period expires.

When a policyholder wants to renew his/her term insurance contract, the premiums may change or remain the same.

When a policyholder outlives his/her policy term, he/she is paid back his/her premiums, although some expenses may be incurred.

In most cases, a prospective policyholder is encouraged to seek the advice of a qualified financial adviser before buying a term life insurance policy.

Whole life/permanent insurance – Types of insurance policies in South Africa

Whole life or permanent insurance is an insurance that covers a policyholder for the rest of his/her life. It does not expire after a certain period of time.

A policyholder pays fixed premiums for his/her whole life.

A whole life insurance allows the policyholder withdrawal options. Due to this option, whole life insurance is insurance in part and investment in part.

When a policyholder dies, his/her beneficiaries receives the face value of the policy, no matter what age the policyholder dies.

A whole policy pays out when the policyholder dies, but sometimes it can pay out when the policyholder is physically or mentally disabled.

Universal life insurance – Types of insurance policies in South Africa

Universal life insurance is more than just a death cover. It brings together the concepts of a whole life insurance policy and those of investments.

It is simply a combination of investment and life insurance cover.

Its working principle is simple. Whenever a policyholder an amount which is higher than his/her monthly premiums, he/she earns interest and it goes to his/her account.

Apart from giving a policyholder a death benefit, universal life insurance gives the policyholder a growth of his/her investment.

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All info was correct at time of publishing