First time parents: Financial security for children is vital
Insurance / 19 October 2018, 05:55am / Joseph Booysen
JOHANNESBURG - Life assurance is a topic that is unlikely to attract much attention despite it being a top priority for the large majority of soon-to-be parents, especially first-time parents who should not overlook the importance of ensuring the financial security and support for their family’s future.
This is according to Jonathan Elcock, founder and chief executive of CompariSure, South Africa’s first independent online life insurance comparison platform.
CompariSure was created to address the lack of access to quality financial products, as well as the country’s growing underinsurance issue.
Elcock said while financially protecting the family’s future might not be an immediate priority, it should be top-of-mind for all expecting parents.
“As exciting as it is to be expecting your first child, first-time parents should not overlook the importance of ensuring the financial security and support for your family’s future. Finding the right life assurance cover for you and your loved ones should not be taken lightly,” said Elcock.
“Life cover is the way to protect your legacy in that you can give your kids the same opportunities hopefully that you would have if your were still around for them.”
Asked what impact having twins or triplets would have on parents, Elcock said with each child there was a financial cost and if one had set goals such as sending a child to private school, that would set them back by more than R1million a child.
“If you have two children for private school it is going to be R2m; for three children, R3m, over their primary and secondary schooling.”
Elcock added that usually for Model C-type schools such as SACS or Rondebosch, it would be between R400000 and R600000 at base level besides extramural activities such as sport.
He said there was also tertiary education costs, which could cost anything from R100 000 to R2m depending on what the child was studying.
“There is so much value in what you put in and what you get out. If you want your kids to study medicine, costs may be about half-a-million rand, and if you send them overseas, that’s another story. If you take out life cover when you are younger it can be a lot more affordable and often a lot much cheaper than what people expect, depending on your profile.”
Elcok said cover could be as little as R200 for R2m worth of cover and added that it was important to identify which insurer met one’s profile.
He said inflation was one of the main factors that one had to consider.
“Currency and inflation are tightly linked to each other, and, in general, when the rand goes up, all your input costs go up, and they push that on to the consumer. But the cost of education can increase each year, and to a degree sometimes the inflationary costs are offset by the fact that you pay off the person’s education over time.
“You also need to choose the right cover increase pattern to match the requirements. Basically, when your child is 5 years old, you have about 15 to 20 years of education left to pay, whereas if they are 20, you might have one or two years left to pay. Your requirements change significantly over time, so it is important that you get some guidance in establishing what sort of cover and premium patterns make the most sense for you.”