Insurance policies you might not be aware of but need

Make sure you have the right insurance type for your needs. Picture: iStock
Make sure you have the right insurance type for your needs. Picture: iStock

We all know of insurance life cover and to some extent, dread disease and capital disability cover. While all these are important and necessary types of insurance, there are other policies that are less known but are crucial to your overall financial well-being.

1. Buy and sell agreement

A buy and sell agreement is essential for business partners. Having such an agreement in place can ensure a smooth transfer of shareholding between partners. This guarantees continuity for the business and peace of mind for the deceased or disabled partner and their family.

It is important that you contact an experienced financial adviser to ensure that the buy and sell agreement is properly structured and meets the wishes of the business partners involved.

READ: Are you making the most of your money?

2. Income protection

Income protection is a long-term insurance policy designed to supplement your income should you not be able to work because of an illness or injury.

The policy continues to pay you a monthly income until you are able to return to work or until you retire. With income protection, you ensure that you can still maintain a similar lifestyle to what you and your family are used to – without putting a strain on the family’s finances.

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3. Retrenchment protector

A retrenchment cover protects you in the event you are retrenched. The cover pays a specific amount of money for up to six months after which, hopefully, you would have found another job. Please note that every insurance service provider has their own requirements and they pay different monthly amounts.

Although the retrenchment protector will not cover 100% of your income, it does provide some relief. Most policies offer a maximum of R30 000 a month for six months, provided you meet the conditions.

Again, this highlights the importance of having an emergency fund.

I was concerned that [Money Makeover candidate] Peter had no access to an emergency fund
Absa financial adviser Leighanne Decker

Find out more about how Peter built an emergency fund

4. Credit life insurance

Credit life insurance has come under the spotlight since the outbreak of the global Covid-19 health crisis. This is an insurance that covers your outstanding debts in the event of your death, disability or retrenchment. It even covers those whose income has been negatively affected by the pandemic.

Most lenders insist that you should have this insurance on your debts – that is the bond on your home, car finance, credit card and personal loan.

READ: How credit insurance can cover your debt

Credit life insurance ensures that you do not worry about the monthly instalments on your debts. Instead, what you owe on those debts or your instalments payable will be covered by this policy.

It is important to note that if you are self-employed, your credit life insurance will only cover disability and death – not retrenchment and loss of income.

I believe that now, more than ever, is the time to equip yourself with financial knowledge because when you know better, hopefully, you will do better.

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