Insurance

How to determine your life cover needs

Risk cover is a fundamental component of a financial plan. Still, it can be challenging to choose the appropriate cover, as your needs evolve according to your life stage. This simple guide helps to demystify the main types of cover, and some key considerations are discussed:

Types of cover

1. Death cover (also called life cover) pays out on your death.

2. Disability cover essentially protects you when you’re unable to work. There are two categories:

a. Permanent disability cover pays a lump sum.

b. Income protection provides risk cover in the form of a monthly income if you cannot continue with your occupation, either permanently or temporarily.

3 Severe illness cover (also known as dread disease cover) protects your income if you are diagnosed with a severe illness. The purpose of this cover is to mitigate the financial impact of living with severe illness, rather than covering the cost of treating the disease.

A customised financial plan to suit your needs

As a starting point, it is important to think about how your family will support themselves if you, as a breadwinner, pass away or lose your income, or become disabled or severely ill. It is advisable to work with a financial adviser to identify and fill the gaps, as part of a holistic financial plan.

As far as risk cover is concerned, most clients have a primary need to protect their income, to take care of their family when they cannot – either due to death or disability. Next on the list is to settle all debts and estate costs, and to protect the beneficiaries’ standard of living. In general, life stage and circumstances determine the cover that needs to be in place.

However, as every client’s circumstances are unique and change over time, they need a customised financial plan to suit their needs, to be reviewed regularly with the help of a financial adviser to keep it relevant.

Sanlam Life is a Licensed Life Insurer, Financial Services and Registered Credit Provider (NCRCP43)