There are so many different types of life insurance available in the South African market that you’d be forgiven for getting them a bit muddled. Still, it’s a critical area of life to sort out, given that the right policy will make sure that your loved ones will be taken care of if something unexpected happens to you.
We’ve previously unpacked the different types of life insurance policies you can choose from, and even talked to the barriers as to why so many South Africans don’t have life insurance of any sort. But the next question becomes… how do you choose the right policy?
It can be a daunting task, but it is a vastly important part of your financial planning, so let’s set your mind at ease and provide you with some tips on how to choose a life insurance policy.
Assess Your Life Insurance Goals
Start with working out why you want life insurance. Seriously think about what you want to accomplish by having this policy in place. For instance, do you want to provide financial security for your family? Do you have big loans that need to be paid off over the next couple of years or so, like a house and car? Do you want a big funeral or for your family to scatter your ashes on an exotic island?
These are all important questions to ask yourself as you assess what you need this policy to do in the event of your death.
A simple example would be that of a single person who is renting their home and whose car is paid off. Their elderly parents are retired and financially stable. This person may choose not to get life insurance and instead opt for critical illness insurance to cover them if something happens during their lifetime, and funeral insurance for their final send off.
That’s rather different to a person who has just bought a house (hello home loan), upgraded to a new car (thanks to a vehicle loan), and has a baby on the way with a stay-at-home spouse. Thankfully, the in-laws have moved in with them, because they can’t afford to live on their own – but can help with the new baby! This is exactly the type of person who would want life insurance capable of taking care of their loved ones in the event of their unexpected death.
Calculate The Optimal Amount
Once you have an idea of what you want your life insurance policy to pay for, it’s time to work out your actual financial obligations and future goals. At this time, you’d want to calculate your present outstanding debts and living expenses, as well as any future costs – like education for your children.
In this instance, it is ideal to work with a financial planner who is adept at working with these facts and figures.
Choose the right type of policy
There are different types of life insurance policies available, such as term life insurance, whole life insurance, and universal life insurance. You can use our previous article to review these options and choose the type of policy that best meets your needs.
Compare Compare Compare
Compare policies from different insurers to find the best cover for what you need, at the best price. This means comparing quotes from a minimum of three insurers. You might even want to compare quotes for another type of cover that’s less expensive, because the policy you choose needs to be affordable and you might find that your first choice isn’t in your budget for the moment.
Feeling Informed?
The fact is that we absolutely need to plan for our future and make sure that we can lessen the impact on those we leave behind. We trust that this information will help you make an informed decision around getting the right cover for you.
Don’t forget that in addition to helpful articles like this, AA Inform can also help you with free tools and resources, such as getting a Will drawn up!
Click here to have a professional team draw up a free Will for you. This will give your family even more assurance that they will be taken care of, no matter what happens.