You’re not invincible, so take cover

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Published Oct 4, 2015

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Johannesburg - It is strange how often events come in threes. In the past two weeks, three people with whom I have been in contact died: a business contact, a long-standing friend and a sister-in-law. One died in an accident and two died of cancer.

This always make me wonder: apart from the trauma caused to loved ones, how much will be available financially to those left behind? About 80 percent of the time the answer is “not enough”.

About three weeks ago, I assisted a client to secure cover and to convert a term policy to a permanent policy after he was diagnosed with prostate cancer.

He felt that the initial cover was insufficient and was sorry that he had not taken more in the past. Once you have lost your health, it is nearly impossible to secure cover.

The problem with us humans is that we always desire things that we can no longer have. So today I will address how to avoid this by using methods to calculate and plan for adequate cover and doing it now rather than postponing it. And, women, please take note that this is no longer just a “man thing”.

The cost of recovering from cancer is devastatingly expensive and if you do not provide adequate provisions, it can wreck the family financially. How often have you heard of family fortunes being dwindled away due to illness?

As an example, a very good and well-known medical aid grants cancer treatment cover to the level of R400 000 a year – treatment for one of the patients in the above example amounted to R1.2 million. They had to cover the shortfall from their own resources. This created a shortfall of R800 000 for two years.

This example illustrates that this family would have required R1.6m in dread disease cover for the cancer treatment.

This cover can be bought as part of a life policy or a stand-alone benefit. This first option is less expensive and should be more popular with some cash-strapped readers.

A correctly compiled policy would have paid.

The next obvious cover is life cover. Here we need to look at cover on two levels. The first and easier to calculate is to add all outstanding debts together and to buy enough life cover to cover these debts.

The second level of cover must be calculated and added to the first. It is a bit more difficult to calculate, but not impossible if you follow the following guidelines:

1. Determine the contribution made to monthly expenses (schooling, utilities, food and so on) by the partner.

2. Determine the amount of additional expenses that will be caused by death (for example, services and repairs to cars, child care, funeral and last expenses costs).

3. Add these two monthly amounts together.

4. Multiply this amount by 200 and add to the first amount to obtain a total amount of life cover required.

The life cover and dread disease cover can be bundled together into one package to give a more affordable solution.

To assist our loyal readers, I am finalising a solution where you can receive 15 percent cash back after 12 months – rather than waiting for three years to get 25 percent back or 15 years to get 100 percent back.

Remember that these covers must be:

* For natural (illnesses) and unnatural (accidental) deaths. Some of the direct insurer solutions are for unnatural death only and will not be sufficient.

* The amount of cover must be sufficient to cover your calculated needs.

* This policy, once taken, must never be cancelled as you may die or lose your health before you can reinstate the cover again.

One of the problems that does exist in our society is that a partner or spouse believes in invincibility or does not believe in life insurance. There is a solution: by law, you will have an insurable interest in such person due to partial financial dependence.

You may, in such circumstances, effect and pay for the insurance on a partner’s life. You will be the owner of that policy with the partner as the life insured.

You can gain a quick indication quote of cost with no obligation on www.e-surance.co.za/life-insurance/. On this site, dread disease cover is nominated by the other popular term “critical illness”.

* Deon Hattingh is a financial adviser and risk planner provider and will assist any readers interested in calculating their needs when they write to him at [email protected].

STAR WORKPLACE

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