Buy Life Insurance

The Life Insurance industry has been given a bad name in the past.
However, current legislation has radically changed the industry. It is now law that any Financial Advisor must be licensed with the Financial Services Board.
If they are not, don't deal with them!

Any professional advisor will do a Financial Analysis with you before you buy life insurance.
In order to determine just how much life, disability or dread disease cover to buy, you should be asked a number of lifestyle questions.

See How Much Life Cover?
Once you have an idea of how much you wish to buy, you need to consider the type of life insurance policy you want.

Type of Life Insurance

Term life cover is a cost effective way of providing a tax-free cash lump sum for your dependants. You choose how long you wish to have cover, allowing you to adapt your cover to your needs. There is no savings value with this type of policy.

Level Term cover is ideal for Bond protection as your bond should not increase over time and it generally has a 20-year term.

You do NOT have to buy bond cover from your lender (bank). If you shop around, you can often get a better deal.
Please call me for a quote.

Another form of this cover is a Family Income Benefit.
If you feel your dependants may not be able to look after a lump sum of cash, this is an answer.
Proceeds payable on your death are paid as a regular monthly income, not as a lump sum.
Alternatively, you could consider a trust to control the proceeds payable.
You buy a term of cover. If you die during this term, the proceeds will be paid until the end of that term.

Accidental Death. You may be in an occupation that has a high risk of death by accident.
Or, your health may not be good and you cannot buy term or whole life cover.
In these cases, accidental death cover is your answer. It will cover you for death by accident, that cannot be traced back to your medical condition.
Again, it is term cover, normally until age 65.

Whole of life cover is just that – cover until you die, no matter your age.
This type of cover can include a savings potion, however this is not a popular option these days.
See New Generation cover

Final Expenses Cover offers cover to pay for expenses that occur upon your death.
Costs such as funeral, debts you owe and immediate cash to help your survivors whilst your estate is wound up.

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Increasing your cover.

Your sum assured can stay the same (the premium remains level) or increase (the premium increases each year) to fight the effects of inflation.
You can choose increases from 5 to 20 percent or the rate of inflation.

You can also buy a Future Cover Benefit. This allows you to increase your cover in the future without having to have medicals (except an HIV test).
This is ideal when you are considering business insurance cover.

Reviewing your cover.

No matter what type of insurance you buy, you should review it when your lifestyle changes.
Events such as a salary increase, marriage or the birth of a child could mean you need higher cover.
Life cover has evolved over the recent past. Products have become extremely competitive.
It is possible that you could save premiums or increase your cover for the same amount you are paying now!

If you have policies older than two years, you owe it to yourself to consider these new forms of cover. Otherwise you could be loosing out on the competitive edge these products offer.

See Why should I reconsider my policies.

But life insurance offers far more than just life cover.

Earning Ability Cover.

Disability cover. Your ability to earn an income is your greatest asset.
You MUST make sure that it will not stop if you cannot work.

Lifestyle Adjustments cover

Dread Disease – With the advancements in medical care, we have a high chance of surviving a dread disease. But, at what cost? Your medical aid may pay the hospital bills, but what about all the other costs? How long will your employer pay your sick leave?
If you are self-employed, how will you meet your bills over a long-term illness?

Premium Waivers

You can now add other lives to your policy. When the first life dies, the insurance company will take over the premiums payable for the survivors life insurance.
You may suffer a disability, yet still need your life cover.
With this benefit in place, the insurance company will take over your premiums, ensuring your life cover continues.

Stand Alone or Accelerators?

These Earning Ability and Lifestyle Adjustment benefits can be structured in two ways.

• As an accelerator - (most life insurance is bought this way). Here a disability or dread disease claim is paid out of your life cover amount.
  It is deemed as an accelerated death benefit payment. It therefore, reduces your life cover by whatever amount you claim.
  This can have a devastating effect on your life cover after a disability claim.
  Not only will your cover then be less, but also you could be uninsurable and never be able to increase your cover.

• Today you can have your Earning Ability and Lifestyle Adjustment benefits as separate cover amounts.
  Then, in the event of a disability claim, your life cover remains unaffected.
  This is of great importance when considering your later estate duty planning.

The Importance of a Guaranteed Premium.

Life Insurance companies guarantee that your premium will not increase (above any annual increase you may have selected) for a period of years.
This ranges from 10 to 25 years.
If, at the end of your guarantee period, the product you have was not sustainable by the company – be that because of mortality figures (the influence of AIDS), poor investment performance by the company or any other factor – you could be faced with a substantial increase in your premium!
The shorter your guarantee period, the less the premium you pay today.
But beware, you could pay in the long run.
It is vital that you investigate the guarantee clause in your contract.

Beneficiary Nominations

There are a number of ways to provide for your dependants.
Nominate specific people to receive money. This avoids executor fees having to be paid.
Alternatively, you can form a trust while you are alive and leave the proceeds to that trust.
Or have a testamentary trust formed on your death, through your will.

Tax

Depending on the reason for your life policy - personal or business - so income tax may be an issue.
You need to get advice as to how you structure your cover, to minimise or cater for any tax liability.

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This is a broad summary of some of the questions you need to have answered when you consider your current or new life insurance.
In addition, every insurance company has added to these basic benefits.
Some link your policy to your medical aid, offering reduced premiums whilst you remain on their medical aid.
Some offer you a return of your premiums.
Others offer options on reaching the term of a benefit.

Shop around when you are buying life insurance or reviewing your current cover.
You can only benefit if you talk to a professional advisor. Call me.

And remember, you have 30-days to change your mind should you not be happy with your purchase.

If you have concerns, please contact me now.

If you would like an indication of what Life, Disability and Severe Illness cover will cost, please complete the WRITE TO ME REQUEST FORM and mail it to me. I will reply with some values for you.

Don't leave your concern here. Call me for advice - no obligation!

pyburn@peterpyburn.co.za

Especially if you want to Buy Life Insurance.