One should at the very least have enough life cover to settle debts

2014-07-09 00:00

LIFE cover tends to be the first thing people abandon when they face financially difficulties — studies show that people cut their life cover before their DSTV subscriptions!

As a result, people die and leave their families with substantial debts or they become disabled and are unable to earn an income.

The problem is that it is not always affordable to have the full cover you need and we have to balance our day-to-day needs with protecting against the unexpected disasters.

But one should at the very least have enough cover in place to settle your debts.

Start off by finding out from your ­employer if they provide life and disability cover and, if so, the extent of the cover provided.

If you still need cover shop around but make sure you are comparing like with like as not all policies are the same.

Life cover, Guarantees:

When looking at life cover there is not much to dispute: when you are dead you are dead. But you need to find out how long your premiums are guaranteed for.

The premium may look good but if it is only guaranteed for one year you may have a nasty surprise the following year.

Age rated:

Also ask if it is a level premium or age rated. An age rated policy tends to be cheaper but the premium goes up each year according to your age. Over time this may become unaffordable.

A level premium is more expensive initially but the premium remains the same. The idea is that you pay more when you are younger in order to cross-subsidise the premiums when you are older.

Disability and

critical illness cover:

The industry has provided a standardised way for insurers to explain the rate of cover which helps you to compare other offers.

Conditions covered:

Lower premium products tend to only cover four or five major conditions like cancer, heart attacks and strokes while other policies may have “richer” cover that extend to more conditions.


Policies pay out differently according to the severity level.

For example some policies will pay out 100% at stage one cancer; another policy may only pay out 25% at this stage while another will only pay out for stage three cancer.

Some policies pay out disability cover if you lose one arm or one leg, while other policies only pay out if you have lost two limbs.

Accelerated cover:

If you have life cover combined with critical illness and disability cover, find out if it is “accelerated” or stand-alone.

Accelerated cover means that your life cover is reduced by the amount you claim from disability or critical illness.

For example, if you had R1 million life cover and R500 000 critical illness cover and developed cancer, you would be paid out R500 000 from critical illness cover.

However if you died from the cancer your life cover would have been reduced to R500 000.

Stand-alone is more expensive, but it means that any claims arising from disability or critical illness will not affect your life cover.

Retrenchment cover:

Find out if your policy has any retrenchment cover. Will your premiums be covered for a period of time if you become retrenched? Does the policy have an option to pay a lump sum if you are ­retrenched?

If a policy is less expensive it will usually have less cover or more limitations, but it at least allows you to select the cover that fits your budget as long as you understand what you are buying and face no nasty surprises when you need the money the most.

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