The popularity of funeral covers in black communities would have you believe we are obsessed with “burying our loved ones with dignity”, when the reality is that most black people are playing catch up and are uninformed about what comprehensive financial planning entails.It takes financial planners years of study to understand product structures, their benefits, the markets they are designed for, the legislation and how to plan around them.
Experts stress that you also need to equip yourself with similar financial education when it comes to policies and investments, so you can make better insurance and investment choices.
NEED FOR FINANCIAL POLICIES
People often think that a policy is something that would benefit them when they die, says Noma Shinga, a senior financial planner at Standard Bank. “They don’t consider the financial benefits that pay out while they’re still alive. This is because of a lack of understanding on the product or misinformation about financial products in general,” Shinga points out.
On the other hand, a common mistake many people make is not with the insurance they choose, but signing for policies and buying them like shelf products, says financial planner, Keketso Mabasa.
“Financial products are not shelf products and require profound knowledge to make suitable decisions. My advice is to demand that a thorough financial needs analysis be done and explained to you, before you commit to buying products. Go the extra mile and request assistance with budgeting,” Mabasa says.
You also need to use the services of financial planners the same way you use doctors, say Mpumi Mbilase, an independent financial planner at Masthead Financial Planning. “Like proper healthcare, financial education is a right and a necessity. And we’re here to provide it, and to help with budgeting, so that people can make informed decisions,” Mbilase says. Check and make sure that the financial planner is accredited, experienced and not just offering products to meet his commission targets, she adds.
IMPORTANT POLICIES TO HAVE
Our experts recommend having the following:
Risk cover. These include life, disability and dread disease cover,and a funeral plan. A life-changing illness or disability due to an accident, may require expensive treatment and expenses that medical aid alone may not cover.
Income protection. This protects your ability to earn your income. It pays in the event of disability, either temporal or permanent, a dread disease event or retrenchment. It provides the ability to maintain your lifestyle.
Retirement annuity. Helps supplement your retirement income while you reap the benefits of a tax rebate. It’s advisable to have retirement annuity over and above having pension or provident funds at work, or a life annuity plan in case you outlive your retirement savings.
Short-term insurance. This includes car and household insurance; property and business insurance, medical aid and hospital plans.
Wills and trusts. To avoid fights for inheritance and ensure your family is properly cared for. Aside from attorneys, most banks and life insurance companies can also assist you with this.
Medium- to long-term investments. Fixed deposits or 32 days-notice accounts, endowments with a minimum term of 5 years; unit trusts or exchange traded funds or o shore investment.