Many people are under the impression that life cover is meant to provide for dependents after death, but nothing could be further from the truth.

Adriaan Beumer, actuarial specialist at Hollard Life Solutions said: “Even young single people without dependents could become ill or disabled, preventing them from being able to work or earn an income. This is why it is so important to understand life cover as more than just a death benefit.”

Instead, life cover should be seen as part of a larger group of insurances including income cover, disability cover, critical illness cover, funeral cover and long-term care,“ Matthew Curtis, an actuary at Hollard Life Solutions said.

According to Beumer and Curtis, life-changing illness can have a significant impact on a person’s ability to work therefore reducing or stopping their ability to earn an income.

"It is important that people understand the range of covers that they need in the event of critical illness or the permanent impairment of faculties preventing work and the earning of an income,“ Beumer said.

Critical illness, disability or income replacement cover can be built into a life policy. During the term of the life cover policy the covers built into the policy will allow people to receive a financial payout should they become disabled or diagnosed with a critical disease that may prevent them from earning an income.

“This means that if you are diagnosed with any condition named in the policy, you can concentrate on recovering, rather than worrying about whether you can pay your bills”, said Curtis.

Critical illness or disability covers are not replacements for medical cover but are designed to cover things such as

– rent

– mortgage payments

– utility bills

– loans and debt

– food

– school fees

– home modifications like stairlifts or ramps.

Speaking to an insurer or a broker is the best way for people to understand how they can structure their life cover to ensure that it meets real risks.

Curtis said: “Insurance professionals can advise on how much money you will need in the event of disability, how long it takes to recover from or to treat certain conditions, what exclusions you can live with – and what you shouldn’t exclude.”

Understanding exclusions is crucial when comparing insurance policies because exclusions vary with different insurance companies.

Beumer said that while the knowledge of the difference between semi or fully underwritten life policies is important, it is not the complete picture.

“Having a semi underwritten policy for which you had to answer a handful of simple questions to secure a R1-million pay-out in the event of your death, or a fully underwritten policy requiring a medical history and independent medical examination to secure a R15-million pay-out when you die, is immaterial if you are bedridden for 15 years,” Beumer said.

Curtis said that covers are optional and that people can mix-and-match covers to suit their specific risks and responsibilities.

“Talk to your insurers. They are there to help. It is not enough to listen to what the sales agent is saying,” Curtis said.

“Policy holders should also read the full content and understand the detail of the terms of their policies. Since this can often be confusing, they should not be shy to ask what things mean or to discuss their risks and concerns with their insurer, making sure that nothing has been missed.“

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