Insurance can better your future

2016-06-29 06:00
THE structure of buildings that were bought with financing, need to be insured. In the case of fire, extra insurance options can help the owner tremendously.   Photos: Marguerite Vermeulen

THE structure of buildings that were bought with financing, need to be insured. In the case of fire, extra insurance options can help the owner tremendously. Photos: Marguerite Vermeulen

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INSURANCE AWARENESS DAY was held on Tuesday (28/06).

Many argue about the necessity of and the circumstances under which an insurance policy is needed.

Express Eastern Free State consulted experts in the field about this important decision. All experts agree: They have all met people who had been saved from financial ruin by good insurance.

Otto Wächter, a financial adviser of Old Mutual, says the broad categories in which insurance policies can be grouped, are long-term, short-term and medical insurance.

Death, trauma or disability and dread diseases long-term insurance include life insurance, disability and dread disease insurance and trauma insurance.

Otto says people who insure themselves for death do so in order to provide for their families after their death.

“It could also be used to pay off debt at death. Life insurance could also cover the cost incurred because of death itself, such as estate tax, capital gains tax and executor’s fees,” says Otto.

Disability and dread disease insurance, says Otto, could also pay off your debt when you lose your ability to earn an income.

“This is especially useful when you borrow large sums of money.”

Policies protecting your monthly income can pay out monthly when you do not earn an income anymore. This will be of great help when you are unable to work.

Trauma insurance covers conditions such as cancer, heart-attacks, strokes and other serious illnesses, which could change your lifestyle.

As people become more and more aware of trauma insurance, its popularity has increased. Some policies pay out a lump sum when, for example, someone is diagnosed with cancer, has a stroke or heart-attack, or needs to undergo heart bypass surgery.

“This can be used for expenses not covered by a medical aid fund. A person could, for example, after a stroke, be confined to a wheelchair and might need to alter his house to be accessible for a wheelchair.”

Otto says many people do not think about these kinds of financial implications.

“You might even need a nurse to look after you.”

He says it could also apply to someone who becomes depressed after a heart-attack, which might lead to a decrease in their salary.

“When their incomes decrease, trauma insurance can cover these kind of situations.”

Otto says at the practice he works at, some clients have indeed been diagnosed with cancer, or have survived heart-attacks.

“At times like these, such funds are welcome. The monthly income of one of our clients who had been diagnosed with cancer, was severely impacted. He earned commission and could not work while going for chemotherapy.”

Otto says apart from the extra medical expenses, the client still had to pay the bills.

“He still needed to pay his vehicle and house and the trauma insurance rescued him from bankruptcy. Without this insurance he could not have survived financially.”

According to Otto, people are more likely to experience trauma in their lifetime than disability and dread diseases.

Car, house, cameras and cellphones

Short-term insurance covers any physical item a person would like to insure. This includes someone’s house and vehicle, house contents, expensive equipment and cellphones.

“Your car, house, cameras and cellphones are physical assets for which limited or comprehensive cover are available.”

According to Otto, car insurance is the most common insurance bought.

Some people will only insure for third-party claims, but when you have a car financed by a bank, the bank will require comprehensive cover.

Otto says people are required to insure the structure of a house when the building is financed by a financial institution.

“In the case of a business buying, for example, an expensive photocopier, it should be insured Z especially if it had been financed.

“If something is of value to you, the bank requirements do not apply. It is not always possible to pay the money when you have damages.”

The different options and plans offered by short-term insurance are vast.

Otto knows many people who have shed tears after their vehicles had been damaged and they did not have proper insurance.

“Nobody likes driving a damaged car.

“However, you can look around to see how many damaged cars have not been fixed.”

He says there are many different policies available for the business world.

“Factories, for example, use very expensive equipment. These are usually insured.”

Businesses also take out insurance to protect them against law suits by the public.

Visits to the hospital

Rolf Wächter, also a financial adviser at Old Mutual and with knowledge about medical aids, says people often take out medical insurance because they do not want to undergo treatment in government hospitals.

Rolf says good medical treatment when you require an operation or after you had been injured in a car accident, could ruin you financially.

“Care in a hospital’s intensive care unit (ICU) will cost you thousands of rands per day. I have had clients to whom medical aids have had to pay out millions of rands.”

He says if you do not have medical aid, you would have to be treated in government hospitals.

“Some people do not complain about government hospitals, but private care is better in many instances.”

Rolf divides medical insurance plans into three main groups.

The traditional plan pays benefits in a hospital, as well as certain benefits outside of hospital. A hospital plan only covers the costs inside of hospital. Another option is the hospital plan with a savings plan.

According to him, the last-mentioned plan is very popular.

“A visit to the doctor will not lead to bankruptcy. But the ICU in a hospital can.”

Gap cover is for instances where the medical aid does not pay the full cost of hosptalisation or that of other medical service providers.

Rolf encourages people to buy medical insurance at a young age, at least before the age of 35. Older people joining for the first time, will be penalised. He says medical aid contributions will increase if there are not enough young people joining the fund.

Otto says all these points come together with good financial planning.

“Consult a financial planner to get a holistic view of your choices and to plan for your retirement. It does not make sense to insure your vehicle, but not your life. Ask an expert to draw up a cutomised plan.”

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