Valentine’s Day is a time to celebrate love and romance, so it’s little wonder that many couples get engaged on this date. But once the exhilaration of the proposal and the prospect of a wedding to plan has subsided, you’ll want to start planning for your and your partner’s financial future too.
After all, with your wedding vows including a promise to stick by each other’s side for richer or poorer, marriage is not just about taking care of each other’s emotional well-being, but about your mutual financial well-being too. So while you’re planning a lifetime partnership with your loved one, Schalk Malan, CEO of BrightRock breaks down five financial questions to ask once you’ve popped THE question:
What are our financial needs and responsibilities?
As depressing as it may be, it’s important to discuss what would happen if you or your spouse were to suffer a debilitating illness, injury or death. Most young couples don’t yet have many financial assets, so at this stage of your lives, your life insurance will probably need to focus on protecting your income-related needs. It’s there to ensure you can afford your debt, everyday expenses, and healthcare costs if something should happen to either of you. This could include paying off your car finance or the bond on a new house, and more arbitrary debts, like the credit card debt you may have notched up to pay for the honeymoon. A qualified financial adviser will be able to help you choose the best cover. And remember, while you typically only need to protect your income until retirement, there are some basic household expenses and healthcare costs that will be there for life. So you’ll need to take into account how much provision you’ve made for retirement when looking at your life and disability cover needs.
Are our life cover policies flexible?
As newlyweds, you may be expecting even more change moments later in your life together especially – if you’re planning to start a family someday. While the number of pay cheques you’ll need to protect will never be higher than they are today, you may want the flexibility to increase the monthly cover as your pay cheques will hopefully take big increases later.. But as you grow older, changes in your health and lifestyle may make it more difficult to get the cover you need. Later in life, insurers may charge you more – or even decline certain cover – as your risk increases with age. The life insurance policy you take out today therefore also needs to offer you future insurability, making it easier to change or increase your cover when your needs and circumstances change.
How can we ensure an affordable policy will still give excellent cover?
Affordability is usually a big concern. With most couples today having to pay for their own weddings and carrying the costs of setting up house together, getting married can put huge financial strain on the budget. As tempting as it may be to opt for the cheapest premium, it’s important to make sure that you do not structure your policy at the expense of future sustainability. Most life insurance policies start off with a lower premium – and lower cover – at the start, but then start to increase your premiums and cover with time. However, your financial liabilities are generally at their highest earlier in life, when you have more future pay cheques to protect, and more debts to pay off. Fortunately, needs-matched policies do exist in the market that can be structured sustainably to offer you more cover upfront when you need it, and reduce over time when you have fewer financial obligations. These policies are also more flexible than traditional products, making it easier for you to increase your cover for certain needs later in life – such as critical illness cover and healthcare expenses – by using the premiums for cover (for income, debt and child-related expenses) you no longer need.
What about dread disease cover?
While protecting your income will ensure you are able to afford your day-to-day expenses and pay off your debts if something were to happen, this cover won’t make provision for unforeseen expenses that may arise if one of you were to become injured or ill. Dread disease or critical illness cover can help you make provision for any additional expense needs that may arise from serious illnesses or injuries like the cost of lifestyle adjustments or shortfalls in medical aid pay-outs. Again, your financial adviser will be able to guide you on the appropriate level of cover for these needs, taking into account the extent of your medical aid cover and your affordability concerns. Be sure you sign up for a product that includes cover injuries and traumatic events too
Should my spouse be my sole beneficiary?
Listing your spouse as a sole beneficiary of your life insurance policy may not be as considerate as you think. Many young couples not only take care of each other, but also have parents or siblings to support. Ensuring that you’ve thought about these other dependents in setting up your beneficiaries will prevent complications in the event where both you and your spouse die simultaneously, and also simplify matters with the division of financial benefits between your different dependents. A qualified, independent financial adviser will be able to assist you with selecting your beneficiaries on your life policy and can also help you with drawing up a will to ensure your financial dependents are taken care of if you or your spouse were to die.