As a parent, you undoubtedly have great hopes and dreams for your children – such as a quality education, a safe home, and a family of their own. You may also have a spouse who relies on your income, or elderly parents and other family members.
Even if you are not the primary breadwinner, your income or the tasks that you undertake in supporting your family are still extremely valuable.
What would happen to all your dependents if anything were to happen to you? So as not to compound their emotional loss with financial worries, it is imperative that you take out life insurance, which is the responsible way to protect and provide for your family’s future.
How life insurance works
Before signing up for a life insurance policy, it’s important to know exactly what life insurance is, and how it can benefit you.
Life insurance provides a lump-sum pay-out to your family should you pass away, ensuring that they can keep up with their financial needs and obligations.
You will be required to pay a monthly premium, which is calculated taking into account the amount of the desired pay-out and your specific risk factors (such as age or occupation). Then, in the unfortunate event of you passing away, the life insurance company pays out a tax-free lump sum to the beneficiaries of the policy.
What life insurance covers
As life insurance pays out a lump sum, it can be used for anything the beneficiaries wish. The best use of the pay-out is to invest it and use the growth to replace your income. In this way, it can be put towards food, bond repayments, medical expenses, school fees and various other living expenses.
The pay-out could also be used to pay back debt – whether on a home, car or credit card accounts – so that your family isn’t saddled with ongoing repayments, plus interest. This will also mean that assets such as houses and cars will remain the property of your family.
How much life insurance do I need?
To work out how much cover you need, you should take into account your monthly expenses, including how much you spend and how much your debt repayments cost you each month.
It’s very important to include your long-term savings goals – such as saving up for a university education for your children or a retirement that will ensure your spouse is comfortable for the rest of their days.
You can speak to a financial planner about what size of pay-out would be sufficient to fund these expenses, or you can use the 1Life online financial needs analysis tool to work out how much life insurance you need.
According to 1Life, life cover policies should be updated regularly to ensure that you have sufficient cover – especially in the case of a life-changing event like a marriage or the birth of a child.
Beware exclusions and be open and honest with your insurer
It’s important to note that each insurer lists different exclusions or conditions under which a life policy will not be paid out – such as a drug overdose or a criminal act by the insured person.
It is also imperative to share any medical conditions you may have with your insurer when you take out the policy. Doing this will ensure that, should you pass away, there will be no obstacle to your family’s financial needs being met.
Get life cover from 1Life
1Life offers life insurance for those looking to protect dependents who rely on them financially to survive, providing peace of mind for the whole family.
1Life has been crowned South Africa’s best direct life insurer for the 8th year running*, and offers affordable fixed premiums, immediate cover, short waiting periods, and guaranteed assurability.
Ts&Cs online. 1Life is an authorised financial services provider (FSP:24769).
* Based on Swiss Re research (2010-2018)
This article was published in partnership with 1Life.