Learn abour your life cover

A beginner’s guide to life insurance

Posted  June 4, 2012

Every family should be financially prepared for any eventuality, be it retirement, illness, theft or death.
It is life insurance that provides financial protection against death. Just as your automotive insurance will provide a payout if your car is damaged or stolen, so a life insurance policy will provide a payout in the event of the death of the insured person.

How does it work?It is not complicated. In return for monthly premiums, your life insurance provider will pay a lump sum to the beneficiaries of your policy in the event of your death. You will determine upfront how much cover you would like to buy and who your beneficiaries will be.

Who needs life insurance?Married with children: If you have dependants that rely on your monthly income, you need life insurance. A life insurance policy will provide for your dependants just as you would have. Your beneficiaries can use the payout to cover living expenses, education costs and even unpaid debt, allowing them to maintain the standard of living that they are accustomed to.

Single for now?Even if you don’t have dependants yet, life insurance is an important part of your financial planning.
With a life insurance policy in place you know that any debt you have will be taken care of along with your funeral expenses.

How much life insurance do I need?Working out how much life insurance you need to buy requires some thought and planning. Get advice from your financial planner and chat to your partner or spouse about it. There are also a number of life insurance calculators available online.

Basically, your life insurance policy will have to cover:

  • Your funeral expenses and any unpaid medical bills related to your death
  • The cost of settling your estate, including taxes and legal fees
  • Outstanding debt

If you have a family you also need to consider:

  • Education costs for all your children, including tertiary education
  • Annual living expenses for 20 years after your death: food, petrol, insurance, utilities, holidays, domestic workers etc.
  • Medical aid for your family
  • A financial buffer for any emergencies

Top insurance tips for beginners

  • Keep these tips top of mind and you won’t go wrong:
  • Never withhold information when applying for life insurance
  • Read your policy documents carefully and make sure you fully understand all the terms and conditions, product benefits, exclusions etc. If you are not sure, ask your insurer.
  • Review your policy regularly. If you take on more debt or have another child, for example, you are going to need to increase your life cover

Life insurance is about providing for your family when you are not around, about making sure that they are financially prepared for your death.

As a breadwinner with dependants it is not something you can afford to be without.
Learn more about Pure Life Cover from 1Lifedirect.

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