Life Cover In South Africa

As a responsible person with a financial obligations and a family, you certainly realize your need for insurance. Your goal is to purchase the right amount of insurance. If you\’re over insured, you\’re paying too much. But that is not as dangerous as being underinsured.

There is a simple equation to assist in determining your life cover needs. Your total cover = needs in the short term + needs in the long term – resources. The steps now listed will serves a guide in analyzing your needs. Remember, however, this formula is only approximate, so think carefully when deciding on a policy purchase.

Short-term needs: Begin by adding up all your short-term needs. These are the immediate needs your family will have upon your death, and generally fall into three categories: final expenses, outstanding debt and emergency expenses.

Medical expenses a result of your fatality, funeral expenses, attorney and executor fees, probate court costs and any outstanding taxes you would be obligated are termed as final Expenses. usage of Credit cards, vehicle loans, and education loans are outstanding debts. Emergency expenses such as medical treatment and emergencies, house renovations and repair, etc are cash reserve. you will have to overvalue the final expense as none can judge absolute hidden and crisis expenses.

Long-term needs: By using mortgage/rent amount and college Fees you can now calculate your long term obligations.

Operating expenses: Next determine your family\’s normally budgeted operating expenses. This will include necessities like childcare, groceries, clothing, utilities, entertainment, and transportation for one year. Multiply this figure by the number of years you want your insurance to cover these expenses. Add the totals of these three expense categories together.

Resources: You\’ve completed the most painful part of the process – determining your income needs. Now you can start looking and the resources you have to meet those needs. Take into consideration all your available savings, investments, death benefits through insurance you may have through your employer and any government assistance your family will qualify for.

Selling any assets would greatly change your lifestyle and the list should look at liquid assets, not home or cars.

The bottom line: Now subtract your resources from the amount of income you will need to meet your family\’s total financial needs. This figure is a good guide to the amount of life insurance cover you should buy.

To be sure you remain adequately insured, you should complete an analysis like this every three years or whenever you have significant life change. Adding a new baby will cause you to readjust for childcare and college tuition costs. Because your mortgage is likely your largest financial liability you want to be sure you have enough cover to pay the balance. But remember, that balance decreases with every payment, so it is important to include this change in your assessment.

Tom Martens is the marketing director lifeinsurance-southafrica.co.za. South Arica\’sleading Life Insurance portal

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