Life Insurance – More Complicated Than It Seems
Taking out a life insurance policy means that upon death the benefits are automatically paid out to the family. Life insurance can be complicated.
It is complicated.
There are some life insurance policies available on the South African market, but not all of them are geared at cash payments to beneficiaries.
For example, take a look at:
Credit Life Insurance
This form of insurance looks after creditors, not family.
It settles specified debts upon the death of the policyholder.
One of the most popular uses for Credit Life Insurance is from banks and other financial institutions who grant mortgages to creditors on immovable property.
In other words, it settles an outstanding bond is automatically when the insured individual dies.
It is also often to cover hire purchase agreements when buying expensive motor vehicles.
What consumers should know is that while financial institutions can insist on this form of insurance, policyholders are free to choose whichever service provider they prefer.
There are two Term Insurances from which to choose – Fixed and Decreasing.
Fixed term life insurance is for a set period and is to set monthly rates.
Decreasing term life insurance is normally to cover bigger loans, such as property bonds and motor vehicles.
While affordable, these policies have no investment or cash value once fully paid off over the term selected – usually between 10 to 20 years.
Universal Life Insurance
It’s an investment option product.
This additional cash payment is credited to the account and earns monthly interest, offering quick fire growth on the investment.
Whole Life Insurance
This form of life insurance continues until death and offers guaranteed payouts.
Some companies do allow payments to cease at retirement age, so check these facts carefully with a broker or financial advisor.
Another attraction of Whole Life Insurance is that you can use it as equity to raise additional loans when you need it.
Which to Choose?
There is no right and no wrong when it comes to life insurance.
Consumers should select the insurance best suited to their individual needs.
Discuss this with a broker or financial advisor and then make a smart and informed decision.
Just remember that life insurance pays out a lump sum when the policyholder dies and assists family members by overseeing the deceased’s estate according to the last will.
Death cover, on the other hand, covers the cost of the funeral and assists the family with a benefit payout.
Conclusion – Life Insurance is Complicated
Each year South African insurance companies pay out billions of Rand in death cover.
Ensure that those nearest and dearest have cover when the breadwinner is no longer there to provide for the family.
Death is inevitable and caring for the financial welfare of family should be of paramount importance.
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All info was correct at time of publishing