Life Cover - Do's / Don'ts / Advice

[TedLasso]

So I am going to have a child appearing on this planet sometime soon :erm:

At 41, this is frightening because I've always lived day to day or as the wind took me. Now I need to really settle down and plan properly for the next 20-30 years.

I've been lucky that I haven't had health issues, etc so just never paid attention to many things and now they all coming into sharp focus.

One topic that I am trying to rectify is the issue of suitable life cover for my family should I not be on this planet soon or should the cycling Gods decree it - I get maimed/disabled or more.

I have the following
Cash in bank/savings: around R250K
Pensions/RA: around R2.4m depending on the Stock markets
Other investment: R600K in a joint property ownership.

I have no debt except for a house I need to buy soon which will eat up all my cash savings. My wife has savings of about R450K that we can use for the house deposit too. She has nothing else.

Please don't berate me for being so gormless as I know I have been lax. Already working on updated wills and new beneficiaries.

With my employer, who I have been working for over 10 years, I have life insurance (cover: R5m) and disability cover ( R43K per month) which the company pays for. I am trying to get the policy documents to see if they cover severe illness, etc. My employer also pays for my medical aid + that of my dependents (excl spouse). I also pay a small amount for gap cover which will cover anything costs that medical aid don't normally pay for.

So I thought I was pretty well covered but perhaps not. I called Discovery today and got a quote for R4m life cover, R2m capital disability and R2m for severe illness which with my discovery status plus other products was a quoted cost of just over R2.2K per month.

My needs:-
Ability to pay off house loan (probably around R3m house)
Future Kids education with university
Support family with income
Support my parents (worst case - siblings can take over should I die)

My questions:-

1) Is my current life cover with my company deemed sufficient to at least cover my needs. My wife can work, should I croak but this is in case, we are both not around. The focus is now on my future kid.

2) Is it wise for me to get a second life insurance policy out on my name? If I leave my company or they fire me, etc - I would need to procure such insurance poste haste and considering my age, I guess the monthly premiums would be steeper than the R2K they would charge me currently?

3) My wife should also have a life insurance policy but does this mean we need to get two separate policies or is there the concept of a joint policy which hopefully reduces costs?

4) Besides discovery, which FSP do you think I should consider for life insurance? Is it better to have all with one or have different providers for different cover e.g. disability with somebody else?

5) Is there anything else I should consider?

Thank you in advance for your valued insights.

 

[fritzm]

1. Always get three quotes. You can also get a lot of insight by asking one salesman to tell you what's wrong with his opposition's offers, and vice versa.

2. If you are a professional, then go straight to PPS. That way you get to keep the profits rather than making shareholders rich.

3. Don't buy policies that are combination insurance and investment. All you get is expensive insurance and an investment with poor returns. If you want insurance, get insurance; if you want an investment then get an investment.

4. Don't rely on tax loopholes, the chance that the loophole will exist for the lifetime of your policy is nil. Whatever else you may think of SARS ,they're not stupid.

5. Read the contract; if it has massive cancellation fees, then find another insurer.

I know these things because I learn from my mistakes, not because I was smart. Hope it's helpful.

 

[Tman*]

1) Is my current life cover with my company deemed sufficient to at least cover my needs. My wife can work, should I croak but this is in case, we are both not around. The focus is now on my future kid.

Go see a financial advisor (preferably more than one), so that they can do the calculations for you to determine the suitable amounts.

2) Is it wise for me to get a second life insurance policy out on my name? If I leave my company or they fire me, etc - I would need to procure such insurance poste haste and considering my age, I guess the monthly premiums would be steeper than the R2K they would charge me currently?

There is nothing that is stopping you from obtaining additional cover. The only thing that might affect that is any future health problems, ie. If you get a stroke in a years time, its going to very hard to get additional cover. Rather sooner than later

3) My wife should also have a life insurance policy but does this mean we need to get two separate policies or is there the concept of a joint policy which hopefully reduces costs?

It all depends if you using rewards programs associated with the provider, for example Discovery vitality, Momentum Multiply etc. If you have been active and fit, and on Vitality gold status, it will probably be worth it, because you can get additional benefits, and/or discounts. Dont join Vitality tho in the hope of getting the discount, you will probably lose money in the long run.

4) Besides discovery, which FSP do you think I should consider for life insurance? Is it better to have all with one or have different providers for different cover e.g. disability with somebody else?

Get a few quotes, and take it from there. You need to compare different service offerings with each other to determine which one is best for you.

5) Is there anything else I should consider?

When applying, be as truthful as possible. You dont want a claim to be rejected due to non disclosure. Also, read your policy docs upon inception, and know when you need to let the insurer know when something changes (for example your job)

 

[vash87]

My questions:-

1) Is my current life cover with my company deemed sufficient to at least cover my needs. My wife can work, should I croak but this is in case, we are both not around. The focus is now on my future kid.

2) Is it wise for me to get a second life insurance policy out on my name? If I leave my company or they fire me, etc - I would need to procure such insurance poste haste and considering my age, I guess the monthly premiums would be steeper than the R2K they would charge me currently?

3) My wife should also have a life insurance policy but does this mean we need to get two separate policies or is there the concept of a joint policy which hopefully reduces costs?

4) Besides discovery, which FSP do you think I should consider for life insurance? Is it better to have all with one or have different providers for different cover e.g. disability with somebody else?

5) Is there anything else I should consider?

Thank you in advance for your valued insights.

1) Your current life-cover with your company could be enough but it depends on what your family's particular needs are, as well as your liabilities and liquidity requirements in the event of death. You'd be surprised how many people don't consider the effect of estate duty, executors fees and capital gains tax at death. A proper estate planning exercise, liquidity analysis and financial projections based on your current situation and objectives will give you the answer you need. It's also worth finding out if the life cover through work is an approved or unapproved benefit, since the one is taxable and the other is not, which would make a huge difference.

2) Should you leave your company it's quite likely that you'll get a continuation offer on your cover, depending on who the product provider is. You're correct that if you had to get a whole new policy you'd lose the premium benefit of having had started the policy when you were younger. Some comparative quotes would help give you a clearer picture though.

3) It's possible to have multiple lives on the same policy which will reduce costs, but only a small fraction.

4) In addition to Discovery, I'd look at PPS, Brightrock, Liberty, and Sanlam. It would only make sense having different aspects of your cover with different companies if that combination of companies would suit your particular needs best. It could work out to be more expensive or cheaper.

5) Quite possibly. It's best to speak to a competent financial planner who can do a proper assessment of your needs and situation.

 

[TedLasso]

Thank you all. Serious food for thought offered. Will find a financial planner - will ask friends and family if they can recommend someone and follow up on the questions you raised too!

Cheers!

 

[vash87]

You're welcome to get in touch via PM if you'd like me to help out with an analysis and some comparative quotes.

 

[pjp]

Did you sort your concern out?
Please let me know if you still need advice.