Life / Death / Disability Insurance

SauRoNZA

SauRoNZA

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Recently changed jobs and I'm now in charge of doing this stuff directly.

Historically I had a financial advisor who calculated all of it and then on my last job change the company provided all the related cover and so we just reduced the personal cover I had to get a total that was reasonable.

Of course like an idiot even asking for the documents with the calculations to provide adequate cover at the previous job I forgot to forward it to myself and now that I've settled down and want to look deeper into this I can't' find the calculations easily enough.

Having become more financially savvy since then I'd like to manage it all myself and not go back to the Financial Advisor and also potentially move away from Old Mutual.

So two things....

1. What is the general calculation based on current income to project future lifestyle requirements. I seem to recall a value of something like 5 times annual income but have no idea where that comes from. And should this be applied equally to both disability and life cover?

Disability is a big concern as I'm a higher risk for that considering my old man had a stroke early in life but more so because I ride a motorcycle every day.

2. Had anyone made use of FNB for this stuff? Obviously looking there due to the eBucks benefits and ultimately paying lower premiums but also just because Old Mutual has annoyed me for a long time.

Thanks in advance.

TLDR; what is the calculation for projecting life and disability insurance needs?
 
I'm not a financial advisor and this is just my personal view / opinion on the matter:

The unfortunate thing about the calculation that you are referring to is that it was "conceptualised" by the insurance industry and you need to keep in mind that it is in their interest to inflate the amount, as the higher the amount covered the higher the premiums and commissions.

In most instances they start off with replacing your current income or a percentage (usually around 75%) there off, but a contradicting opinion is that you only need sufficient insurance to cover future expenses.

(For example, if you earn R10,000 pm and your expenses are only R5,000 with the other R5,000 going to investments, then your insurance probably only needs to cover R5,000 per month.)

Now, if you are already 50 years of age and have investments that will provide income of R7,000 per month with no dependants, then do you need any insurance?

My suggestion is to rather look at your current situation, determine who your dependants are (wife, kids, parents) and what you and them would need in each unique circumstance (death vs disability) and then decide how much insurance you need.

Use any savings (if there are any) to increase the amounts you invest. (unfortunately being part of a company group scheme affords some savings over procuring insurance in your personal capacity and lower cover might end up costing you more)

Read this link about the 4% rule / the rule of 300 - it may help with your decision: https://justonelap.com/wealthy-maths-the-4-rule-rule-of-300/
 
I was in the same boat as you (started doing everything myself since 2008)

Some advice, if you earn R30 000 a month, and take out disability cover for R20 000 (they wont payout 1c), or rather, lets just that is Liberty's rule. It must be linked on your salary slip.

If you insure yourself for less (check the fine print), the same for over insuring !
 
zerocool2009 said:
I was in the same boat as you (started doing everything myself since 2008)

Some advice, if you earn R30 000 a month, and take out disability cover for R20 000 (they wont payout 1c), or rather, lets just that is Liberty's rule. It must be linked on your salary slip.

If you insure yourself for less (check the fine print), the same for over insuring !
Click to expand...

What do you mean linked on salary slip? The insured amount has to match exactly?
 
whatwhat said:
What do you mean linked on salary slip? The insured amount has to match exactly?
Click to expand...

People over insure or under insure (read the t's and c's) of the product.

when I found out how Liberty works, I just canned the product (meaning, why pay for something and if I am 10% out I get R0 when I need it most).

On top of it, ask the broker who sold you the policy, "what if ... "
 
PhreakBoy said:
I'm not a financial advisor and this is just my personal view / opinion on the matter:

The unfortunate thing about the calculation that you are referring to is that it was "conceptualised" by the insurance industry and you need to keep in mind that it is in their interest to inflate the amount, as the higher the amount covered the higher the premiums and commissions.

In most instances they start off with replacing your current income or a percentage (usually around 75%) there off, but a contradicting opinion is that you only need sufficient insurance to cover future expenses.

(For example, if you earn R10,000 pm and your expenses are only R5,000 with the other R5,000 going to investments, then your insurance probably only needs to cover R5,000 per month.)

Now, if you are already 50 years of age and have investments that will provide income of R7,000 per month with no dependants, then do you need any insurance?

My suggestion is to rather look at your current situation, determine who your dependants are (wife, kids, parents) and what you and them would need in each unique circumstance (death vs disability) and then decide how much insurance you need.

Use any savings (if there are any) to increase the amounts you invest. (unfortunately being part of a company group scheme affords some savings over procuring insurance in your personal capacity and lower cover might end up costing you more)

Read this link about the 4% rule / the rule of 300 - it may help with your decision: https://justonelap.com/wealthy-maths-the-4-rule-rule-of-300/
Click to expand...

Yeah that's why I said my concern isn't too heavy on the life insurance part as that really just needs to settle debts that would be outstanding and the rest would fall away as I'm no longer in the picture.

My bigger concern would be disability that needs to be keep me going and provide my current income on top of that into perpetuity.

But yeah the 4% rule is probably spot on and would help it getting me to work it out accordingly, but also means it's basically unaffordable to try and sustain that lifestyle forever.
 
zerocool2009 said:
I was in the same boat as you (started doing everything myself since 2008)

Some advice, if you earn R30 000 a month, and take out disability cover for R20 000 (they wont payout 1c), or rather, lets just that is Liberty's rule. It must be linked on your salary slip.

If you insure yourself for less (check the fine print), the same for over insuring !
Click to expand...

Huh? It has nothing to do with your salary.

It's a lump sum amount that gets paid out should have you a disability.

You can't really over insure it either, you'll simply have more money should **** hit the fan.

But yes we've learnt a long time ago that Liberty is not great already.
 
SauRoNZA said:
Huh? It has nothing to do with your salary.

It's a lump sum amount that gets paid out should have you a disability.

You can't really over insure it either, you'll simply have more money should **** hit the fan.

But yes we've learnt a long time ago that Liberty is not great already.
Click to expand...

Check the fine print and t's and c's (trust me on that one). That is why I canned "L"
 
I think zerocool could be referring to one of the retrenchment benefit/income protector policies that payout in the situation where you lose your job. These are normally linked to your current salary up to a certain maximum amount.

As for life, disability and severe illness there isn't really a hard specific ruleset that I'm aware of. I sat with two brokers so far this year and both were only interested in quoting based on what I viewed as my requirement.

I've got my life cover set at 2x annual including bonuses and benefits. In my situation, this would allow for the settlement of my full bond, and I don't have any other debt, and a generous lump sum to carry on with. I also have some other minor policies to top up with.

Disability, dread disease/illness is set to half of the life value. The important thing to note here to take the dread disease/illness cover that pays out per incident. It's more expensive but you are covered for every instance you get something unwanted.
 
Arzy said:
I think zerocool could be referring to one of the retrenchment benefit/income protector policies that payout in the situation where you lose your job. These are normally linked to your current salary up to a certain maximum amount.

As for life, disability and severe illness there isn't really a hard specific ruleset that I'm aware of. I sat with two brokers so far this year and both were only interested in quoting based on what I viewed as my requirement.

I've got my life cover set at 2x annual including bonuses and benefits. In my situation, this would allow for the settlement of my full bond, and I don't have any other debt, and a generous lump sum to carry on with. I also have some other minor policies to top up with.

Disability, dread disease/illness is set to half of the life value. The important thing to note here to take the dread disease/illness cover that pays out per incident. It's more expensive but you are covered for every instance you get something unwanted.
Click to expand...

Arzy, spot on (sorry guys, I got confused) Hands in the air (sorry sorry sorry)
 
Work out what you need covered - I didn't use any random calculation.

For life, I sat down and worked out how much my wife would need to take of our kid, and offer her the same lifestyle - including settling the bond - and taking into account she has a good job.

For income protection (via disability, etc) - its capped at a % of your salary - keep in mind you'd probably not need your full salary anyway as life has changed.

For dread disease / permanent disability , work out the lumpsum you'd need to maintain your new permanent sitation, or impared situation, including settling your bond, debt, etc. AND/OR - what you'd like paid out to facilate overseas treatment.
 
btw - if you have kids, also look at dread disease / disability cover for them - I just went through at exercise for our daughter.
 
I'd be interested to hear your outcome; on your second question, I did just this with FNB (I'm currently with Old Mutual). So it was over the phone (I started on the app then quit, then someone called so we went through the whole process) so I might not have given proper values to work on. So full disclaimer, it might not be comparing apples to apples but FNB appeared to be more expensive for me.
Process was seamless and painless enough though.

*Edit - currently covered to basically cover debt and probably pay for school fees till the kids are done. My disability cover is way too low though.
 
Arzy said:
I think zerocool could be referring to one of the retrenchment benefit/income protector policies that payout in the situation where you lose your job. These are normally linked to your current salary up to a certain maximum amount.

As for life, disability and severe illness there isn't really a hard specific ruleset that I'm aware of. I sat with two brokers so far this year and both were only interested in quoting based on what I viewed as my requirement.

I've got my life cover set at 2x annual including bonuses and benefits. In my situation, this would allow for the settlement of my full bond, and I don't have any other debt, and a generous lump sum to carry on with. I also have some other minor policies to top up with.

Disability, dread disease/illness is set to half of the life value. The important thing to note here to take the dread disease/illness cover that pays out per incident. It's more expensive but you are covered for every instance you get something unwanted.
Click to expand...

Yeah that makes more sense for Zerocool’s statement as confirmed above.

Disability in my view should be the highest value of the entire lot as it’s more expensive than being dead. (My old man was wheelchair bound 14 years ago so I’ve seen what that **** costs).

However that doesn’t mean dread disease and severe illness need be the same and is usually much lower as you say on a per incident basis.

I’m almost cerise now my company had 5x annual cover for both life and disability wrapped into one, but you’ll never get that outside a group life plan for a decent price.

I think I’ll get some quotes from FNB for the minimum values as per ebucks rules just to see what the damage is like.
 
Sepeng said:
I'd be interested to hear your outcome; on your second question, I did just this with FNB (I'm currently with Old Mutual). So it was over the phone (I started on the app then quit, then someone called so we went through the whole process) so I might not have given proper values to work on. So full disclaimer, it might not be comparing apples to apples but FNB appeared to be more expensive for me.
Process was seamless and painless enough though.

*Edit - currently covered to basically cover debt and probably pay for school fees till the kids are done. My disability cover is way too low though.
Click to expand...

Yeah the thing is often the expense is relative to the offering.

Also if I’m getting 40% off back in ebucks it will be hard to be more expensive in real terms.

If it is even after ebucks then it’s just silly.
 
Be very careful to read the small print with disability / income protection insurance. I contributed around R700/month for maybe 25 years from when I first started on my own and tried to claim once - a week off work after a bicycle accident. Nope, rules for accident is that payment only starts after 30 days. OK, i did not read the policy.

But a friend with PPS was shot and maybe 1 week off work, 10 days on half day and PPS paid without a murmur.
 
It depends on the policy - you can select the waiting period. When I was a contractor, mine was a week - now I'm permanent, its a month. You also pay less for the longer waiting period.
 
Oldfut said:
Be very careful to read the small print with disability / income protection insurance. I contributed around R700/month for maybe 25 years from when I first started on my own and tried to claim once - a week off work after a bicycle accident. Nope, rules for accident is that payment only starts after 30 days. OK, i did not read the policy.

But a friend with PPS was shot and maybe 1 week off work, 10 days on half day and PPS paid without a murmur.
Click to expand...
If I remember correctly, most brokers will quote on a month's waiting period because the expectation is that you will utilise sick leave on the first month and therefore won't need it. As xrapidx pointed out, a longer waiting period is a lot cheaper.
 
SauRoNZA said:
Yeah the thing is often the expense is relative to the offering.

Also if I’m getting 40% off back in ebucks it will be hard to be more expensive in real terms.

If it is even after ebucks then it’s just silly.
Click to expand...
Ja I'm going to sit down this weekend with my Old Mutual stuff and do a proper reevaluation.
 
rather stick to a broker

you are wanting a life insurance politicly that will pay your nominated beneficiary directly upon your death.
you are wanting funeral cover bundled into that.
you are wanting disability cover that will pay you directly.
you are wanting income protection that will pay you directly

the important thing in all this is ease of claim in any of these insured events.
you should assume a 3rd party / beneficiary / representative may have to lodge a claim.
 
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