COVID-19 UPDATE: We're here to help. Click here to find out more.

Use your life insurance pay-out wisely

30 October 2012
1 minute read

Invest your spouses life cover payout

As the beneficiary of your spouse’s or partner's life insurance policy, you received a large lump sum pay-out from his/her life insurer (the insurance company they had a policy with). You are responsible for ensuring that the pay-out is used carefully and wisely, and that funds are available as and when your family needs them. This is not a responsibility to be taken lightly. While we recommend that you work closely with a financial advisor to plan how to invest and spend the money, here are a few guidelines.

First and foremost, you will need to use some of the pay-out (accelerated Funeral Benefit) to cover your spouse or partner's funeral expenses if he/she did not have any funeral insurance. You will also need to put some money aside to cover the costs associated with settling his/her estate.
Second, you need to calculate living expenses for your family until the day that your children are old enough to look after themselves.

These expenses should include everything from daily living expenses to healthcare and education costs and monthly savings. If you do not have one, you also need to build in an emergency fund for the family to cover possible retrenchment, emergency repairs to the house or car etc. Once you have a lump sum, calculate what portion of these expenses you will be able to cover with your salary. Any outstanding amount will have to be covered by the life insurance pay-out.

If there are still funds available after living expenses and an emergency fund have been taken care of, consider paying off a portion of your outstanding debt (until they can find means of paying it off) and contributing something towards your own retirement.

Work with your financial advisor to determine how best to invest your pay-out so that funds are available when you need them, for example monthly to cover living expenses or on an ad-hoc basis, for example when you need to access your emergency fund.

A great option to consider is to not spend all the entire lump sum. It would be wise to save some in a way that would accumulate interest. Learn more about investing your money into unit trusts with 1Life Invest.

Enter your name and contact number and one of our consultants will call you back:

Please type in your name
Please type in a valid SA number
Call me back