Q&A: The Importance of having a Life Policy

Is a Life Policy something you should have?

Having a Life Policy and having a Will generally go hand in hand, but it’s difficult to keep track of the pro’s and con’s of all of the options! While our office can draft your Will and advise you on your Estate Planning options, we decided to get some answers from someone who knows about Life Policies to help make that decision a bit easier for you.  Tenille Viviers, a Certified Financial Planner, from Pagdens Financial Services answered a few questions for us.

Question One:

What are the benefits of having a life policy?

Answer:

Life insurance is a fundamental part of having a sound financial plan.

Society has such a negative connotation towards Life Insurance policies, but if structured correctly, they can be your, and your family’s, saving grace in times of financial strain due to a loss of life, a disability event or dreaded disease.    

Question Two:

What happens to the money you have put in, if you need to cancel your life policy before you die?

Answer:

Generally, you will not get a refund when you cancel a life policy as the premium you paid was for the risk the insurance company undertook to cover your life.  However, some companies do offer a “premium back” or “cash back” guarantee after certain periods.

Question Three:

If I have a Will, do I still need to have a Life Policy?

Answer:

A Life Policy is not a requirement of a valid Will, however, an estate duty and liquidity calculation would help ascertain if there is a liquidity shortfall in the estate. Life Cover payable to the estate could ensure that all outstanding liabilities (bond, credit card, vehicle finance) as well as funeral and burial costs are covered.

It is important to remember that your Will deals with all of your assets and provides certainty to your heirs regarding who should receive what. Having a Will is vital! If you have a life policy you can decide whether you want to nominate a direct beneficiary or nominate your estate as the beneficiary. 

Question Four:

What must I take into account when deciding on the amount of my life policy?

Answer:

There are many factors to consider when deciding on the amount of cover to apply for. Besides your outstanding liabilities, you may also have a responsibility towards your loved ones who may be dependent on you for financial support. We advise our clients to do what is within their means, let this be a small uncomplicated policy with an affordable premium and the correct comprehensive benefits. Your loved ones will thank you! 

Question Five:

Will Covid-19 affect my Life Policy paying out?

Answer:

This is dependent on the insurer, in most cases, your Life Cover will payout should you pass away due to Covid-19.

I have received numerous queries with regards to Sickness & Disability Income benefits, members who stay at home as a precautionary measure (ie. national lockdown) without being confirmed as a “person under investigation” would not qualify for these Sickness and Disability benefits.

You should contact your insurance company or broker if you have any queries or require clarity of their specific protocols. Most insurance companies are also providing some form of a “premium holiday” for those who require financial relief during these unprecedented times, which may be of great assistance!

Well there you have it, life policies can be very important and a cost effective way to ensure your family is taken care of after your passing. It is wonderful to know that some insurance companies are coming to the assistance of their clients by providing necessary relief during this stressful and generally financially draining time.

At Pagdens, we offer comprehensive Estate Planning, Administration and Will Drafting, but it is important to speak to a financial adviser about the correct financial products for you and your unique situation.

A big thank you to Tenille Viviers for the time taken to answer our questions, we appreciate your input! Tenille can be reached at tenille@pagdens.co.za for more information.

This article is for general information should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact an attorney for specific and detailed advice. Errors and omissions excepted (E&OE)