What is Life Insurance?
Life Insurance is an insurance policy that covers anyone that is dependent on you. In the event that you die due to natural or unnatural causes your life insurance policy pays out to a beneficiary of your choice. This lump sum can then be used to pay any outstanding debt and also provide an income to those you leave behind.
With a Life Insurance Policy you also get benefits such as potential legal, medical and funeral costs in the event of your savings not be sufficient.
Who is eligible for Life Insurance?
Well, everyone is eligible for life insurance. The younger you are when taking out a Life Insurance Policy, the better.
How much Life Insurance do I need?
As a rule of thumb, there is a way to calculate how much Life Insurance you will need:
- Take your gross monthly income x 12 = annual income before tax
- Calculate the number of years left to your expected retirement age, i.e. retirement age – current age = number of income earning years left
- Multiply your gross annual income x the number of income earning years left = the life cover required to replace your income
- Add the amount of debt/liabilities you currently have to 3
- Subtract any current life insurance you have = how much life cover you should potentially have
What do you mean by ‘beneficiary’?
A beneficiary is a family member, your spouse or even a trust that you nominate that will receive the lump sum, should you pass away.
How do I choose a beneficiary?
In the event that you have a family, you can name your spouse as a beneficiary and if you have children, you can divide your Life Insurance policy between your children. You can also nominate a trust fund.
Should you still be single and don’t have a family, you can even nominate your favourite non-profit organisation to receive the money when you pass away.
Do I require a medical exam to take out a Life Insurance Policy?
In most cases Life Insurance companies do ask that you take a HIV test. These companies will pay for the test and will set a date, time and place that is convenient to you.
When does my Life Insurance cover starts?
As soon as your Life Insurance Policy has been approved and your first premium has been payed, you will start to enjoy the full benefits of your life insurance policy.
What happens if I don’t attend to my Life Insurance Premium?
When you skip on a Life Insurance Premium, you will not be covered for the month you have skipped. It is therefore advisable that you contact your Life Insurance company to make alternative payment arrangements. Should you skip more than one payment, your Life Insurance company may cancel your cover and you will not be covered any more.
My lifestyle has changed – does that affect my Life Insurance Policy?
Yes it does. Most of us take up new hobbies, and sometimes those hobbies might be more life threatening e.g. rock climbing, sky diving, deep see diving, etc. and therefor it is advisable that you review your policy as soon as you start a new hobby. The reason is that your current life insurance policy might not cover your new hobby.
What is meant by a ‘high-risk client’?
A high risk client is someone that poses a higher risk of dying prematurely.
It is also a fact that smokers pays a higher premium than non-smokers. If you have quite smoking in the past 5 years this might also affect your premium. Other examples of a ‘high risk client’ is individuals with hazardous jobs or hobbies and also includes individuals that had a past dependency on alcohol and drugs.
It is important that you are completely honest about your health and lifestyle when applying for a Life Insurance Policy.
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