It’s almost the middle of the year and you may have updated your short-term insurance policies, but do you give your long-term assurance the same attention? This includes your life insurance policies, dread disease cover and income protection policy.
Although it may not be necessary for each person to have Life assurance, income protection, and lump-sum disability & Critical illness assurance, it is important that each person has cover which they require dependent on their life stage. For example, a young person with no debt and no dependents may not require life assurance, but they will require income protection to ensure they can still receive an income if they become unable to work in order to still live a full life and not become a burden to their family members. Equally, a person who does have a family and does have a bond on a house may need life cover to ensure their dependents are looked after when they are gone, including settling the bond on the house, and income protection to ensure their family still has an income if they are unable to work. Lump sum disability and critical illness may also be required to assist with making changes to their surroundings in order for them to carry on with their day to day lives, or to assist with paying for medical bills which may not be covered by a person’s medical aid.
Ideally, you should review these policies on an annual basis to take into account any changes or life events that may have occurred in the last year. Some of the events that could change your requirements are:
Life insurance, dread disease cover and disability insurance – If you have lost a significant amount of weight or have stopped smoking in the past year, notify your insurer so that they can reassess your risk and possibly adjust the premium on your life insurance policy. An improvement in your health will also positively impact your dread disease insurance needs and premiums as well as your disability insurance because you are a reduced risk to the insurer.
Life insurance, income protection and retirement savings – Your needs might change as you now have a spouse, who will be financially impacted if you die. This may mean you will have to change the beneficiary on your life insurance policy, if you already have one, or you may need to take out a new life insurance policy. You may also need to change the beneficiaries nominated on your retirement investments.
Buying a home
Life insurance – If you buy a property, you should consider taking out a life insurance policy, to cover the home loan debt if you die so that your family doesn’t have to sell the property to settle the debt. A life insurance policy will cover the bond if required and will still pay out to your beneficiaries if the bond has been paid off. All lenders will require you to have life cover, to protect the loan and they will offer you cover, but this is usually extremely expensive for the cover you receive. Rather speak to your RWM Private Wealth Manager and let them get competitive quotes from a number of insurers to ensure you are paying the lowest premium for the cover you require.
Having a baby
Life insurance – A baby is exciting but also means that there is someone who is completely dependent on you. Review your life insurance so that you know that your child or children will be financially provided for if you die. When making calculations, you may want to factor in the cost of their education while they are still young.
Change in your monthly income
Income protection and disability insurance – This doesn’t have to be an extraordinary event. Even a standard across-the-board salary increase can impact your income protection needs. This means that any disability insurance or income protection policies that you have need to be updated. It is very important to remember that the insurers are by law only allowed to pay a maximum of a person’s net salary, or 75% of their gross salary collectively should they have a valid claim, and therefore we find that many individuals are over insured in this regard and are wasting money paying premiums on additional benefits they will never be able to receive should they have a claim, which could rather be redirected to their savings.
Life insurance, income protection and retirement savings – Just as when you got married, getting a divorce requires a change of beneficiary on your life insurance and income protection policy, your retirement investment products and a change to your will. You are allowed a “grace period” of three months to change your will. That is, if you die within three months of your divorce, then your ex-spouse does not inherit as per your will. However, if your death occurs well after three months from the date of your divorce and you have not updated your will, then your ex-spouse could stand to benefit, to the detriment of your dependents or persons you would have wanted to benefit from your estate.
If you do require advice on what assurance cover would be adequate for your unique circumstances or would like us to request comparative quotes for you from a number of insurance houses, please do not hesitate to contact your RWM Private Wealth Manager.