Planning for life’s speedbumps and detours

The Beatles said: “Life happens while we are making other plans”… How often have you heard people saying: “If you told me a year ago, this is where I’ll be today, I wouldn’t have believed you”?

This statement could either be positive or negative.

One of the many truths about a positive lifestyle is enjoying the happy and special moments as much as you can; not neglecting to provide for the unforeseen and sad moments.

This includes protecting oneself and one’s ability to earn an income as well as providing for one’s family in traumatic circumstances; whether it be the passing away of a family member, illness or disability.

We are usually able to manage most negative situations if we are in good health. However, the moment our health deteriorates, we start losing the battle, especially if we don’t have a support system and financial assistance. It’s frequently mentioned that money can’t buy happiness, but it can go a long way in making sad and difficult times bearable.

Every individual’s situation is unique, therefore the need for life insurance, disability and critical illness cover differs from one person to another. It is essential to determine how much insurance should suffice your needs. “Too little too late” is a reality nobody wants to be confronted with.

The amount of life insurance needed is usually determined by taking into consideration dependants (their age and ability to earn an income if you pass away), debts and last expenses (funeral cost, executors fees, TAX, transfer costs etc.). The best case scenario is to have sufficient funds to pay last expenses, settle all debts and provide a monthly income for dependants.

Disability cover is usually divided into two benefits: a lump-sum or capital disability benefit and an income continuation benefit (income protection). The capital disability benefit will enable one to settle debts (bonds, vehicles, loans etc.) and provide additional funds to make life easier. This may include modification on a vehicle and/or customised bathroom facilities. The income continuation benefit substitutes one’s monthly income to a maximum of 100% of net income. In order to keep up with the cost of living, it will be increased annually taking the consumer price index (CPI) into account. Income protection payments cease at age sixty-five or seventy; however, nowadays most insurance companies offer lifelong benefits.

The last well-known element of life insurance is the critical/severe illness benefit. Regarding insurance cover, there is no guideline on how much ought to be enough. The industry norm is more or less six times one’s monthly salary or enough to cover one’s debts. The benefit will be paid out as a lump-sum, should a critical illness be diagnosed. The money may also be used to pay for more aggressive treatment, day-to-day expenses or frail care. The financial impact of a critical illness is often underestimated and may have a devastating effect on one’s financial position, even if you are a member of a good medical aid.

Determining the cover needed to provide for your future is the first step in planning for the unforeseen. The second step is to find the best insurance company for your needs: Different companies cater for different needs and they offer a whole spectrum of additional cover to ensure comprehensiveness.

Recommendations:

• Review your life insurance or risk cover on an annual basis

• Consult a professional financial planner to determine the best insurance levels as well as products that provide in your personal needs.