Now is the time to take steps to ensure that your household can meet the financial challenges that often arise during the summer holidays, the Association for Savings & Investment South Africa (Asisa) says.
1. Risk protection
With more people taking to the roads during the holidays, it is important to have comprehensive risk protection for you and your family. This includes life and disability cover, as well as medical scheme membership, Peter Dempsey, the deputy chief executive of Asisa, says.
According to Asisa’s 2013 Life and Disability Insurance Gap Study, which shows the difference between the life and disability cover people have and the cover they need, the average income-earner’s life cover shortfall is R700 000 and his or her disability cover shortfall is R1.1 million.
One advantage of life assurance is that, if you nominate your spouse as a beneficiary, it is likely that the life company pay out the benefit within days of your death, and your family will not have to wait for your estate to be wound up to have access to cash, he says.
Dempsey says disability cover is designed to replace months or years of income if you can no longer work. “This is particularly significant when you consider that you would still need to support yourself, as well as your family, for years to come,” he says.
A financial adviser can help you to choose policies that will suit your financial circumstances and your family’s needs, and help you to understand the conditions of these policies, he says.
You can buy cover directly from an insurer via a call centre, but Dempsey warns that you will have to come to grips with the benefits and exclusions without help.
“Some life policies may, for instance, cover you for accidental death, but not pay benefits if you contract an illness and die suddenly. You must be very clear about what you are buying and what you are covered for,” he says.
Dempsey warns that health insurance is not an adequate substitute for belonging to a medical scheme. “Many people underestimate the costs of medical care. A single day in a private hospital can cost well over R10 000,” he says.
2. Secure your home and vehicle
Short-term and motor vehicle insurance will substantially reduce the financial sting of any unexpected events, Dempsey says.
According to the Fire Protection Association of South Africa, there were 4 859 fires in formal residences in 2013. The South African Police Service reported that there were 253 716 cases of burglary of homes and 55 090 cases of motor vehicle theft across South Africa between April 2014 and March 2015.
3. Make a list of important financial information
Should anything happen to you, your family will need certain information in order to manage the household’s finances and wind up your estate, Dempsey says. This information should be in a single, secure file, which should include the details of your:
* Financial adviser;
* Life assurance policy;
* Last will;
* Disability policy;
* Medical scheme;
* Short-term and motor vehicle insurance policies;
* Mortgage bond;
* Bank accounts;
* Retirement annuities and/or retirement fund; and
* Details of all your investments.
4. Have a will
“Making a will can seem daunting, but once you have gathered your financial information, the process will be much simpler,” Dempsey says.
Your will should address what should happen to your children and other people who are financially dependent on you. It should also address the distribution of your assets.
Dempsey says there are often complexities to a will that you may not have considered, and so you should obtain advice from a professional estate planner.
5. If you are travelling
If you are taking a holiday, Dempsey has the following tips to smooth out any potential bumps along the way:
* Phone your bank’s credit card division if you are going overseas. If your bank does not know that you are abroad, it may freeze your card following what may seem to be a suspicious transaction.
* Check the travel insurance on your credit card. Make sure that the cover is sufficient, and read the terms and conditions. Print out the details of this insurance, and keep them with you as proof.
* Keep your personal details, including those of your medical scheme, and a list of emergency contact numbers on you, in your car or in your luggage. This will help to identify you, and people will know who to contact in the event of an accident or emergency.
* Leave a detailed itinerary with a trusted friend, neighbour or relative. This will ensure that someone will know where to contact you if an emergency occurs at home. This person will also know where to start looking for you if you do not arrive at your destination.