Why do you need life cover?

Life cover may seem like an unnecessary expense that you can skip. However, this could leave your family in serious financial straits if you pass away unexpectantly.

We find out how life cover works, and we consider how funeral cover is different from this. We then look at some tips for choosing the right cover for you and your loved ones.

Tip: Once your family is covered, you should make sure your vehicle is protected too – find out more.

The difference between life cover and funeral cover

Leza Wells, chief product actuary at Bidvest Life, says that life cover gives you peace of mind that your dependents are taken care of when you pass away. 

“In general, life cover either provides your nominated beneficiaries with a lump sum payout to help them settle once-off expenses, or it pays them a monthly income for a set period,” she says.

“Life cover provides long-term protection for your beneficiaries when you pass away so that the life you had planned for them can continue, even when you’re no longer around.”

In contrast to this, Wells explains, funeral cover only considers a family’s immediate needs after the death of a loved one. It constitutes a once-off payment, which is released within 24 to 48 hours.    

How to choose the right life cover

Bradley du Chenne, CEO of Hippo.co.za, offers the following tips to keep in mind when choosing life cover.

1. Consider the amount of cover your family needs. Make sure that you align this closely with your current debt and any future expenses for your spouse and kids.
2. Consider the increases in your monthly premium over time. Be realistic and assess whether you will be able to afford the price escalation in years to come.
3. Choose your preferred cover type - whole of life cover or term-specific cover. The former is for the duration of your life, while the latter is just for a certain period.
4. Understand the cover you’re paying for. Does it include disability and dread disease, or is it purely life cover that only protects your loved ones in the event of death?
5. Make sure you shop around. It’s crucial to compare products, but always use a comparison of both the premium and its benefits.

Documents to consider for your application

Wells says that the amount of cover you apply for and the benefits you select will determine the type of financial evidence your provider will request. For example, they may ask you for your payslips, bank statements, SARS documents, accountant letters, or financial statements.

“A payslip isn’t always a standard requirement. However, insurers may want to verify your income and confirm that the business you work for is operational,” she says. She adds that cover is always subject to medical, financial, or occupational underwriting.

“Before choosing your cover, consult a financial adviser to ensure you understand the best possible options available for your financial needs,” Wells concludes.

You should also protect your vehicle in case you are involved in an accident – get a quote here.