Future-proof your financial plan with long-term insurance

The life insurance industry in SA continues to evolve. Regulatory changes coupled with technological innovation and disruption, as well as an increase in the one-stop-shop concept, means the industry remains vibrant and dynamic.

Still, there are a few misconceptions when it comes to long-term insurance. Many consumers view paying for disability or dread-disease cover as a grudge purchase and would rather invest their money elsewhere. But it’s important to realise that these “grudge” long-term insurance offerings are an essential aspect of financial planning.

While investing is about growing your wealth ahead of inflation, insurance is about protection against those events that can have a devastating and lasting impact on your finances. One health event could wipe out years of savings and leave you drowning in debt. Even worse, a car accident could leave you unable to earn an income for the rest of your life, the personal implications of which can help put insurance into perspective.

And that's exactly how long-term insurance should be approached: it needs to be personal; aligned to your needs and unique circumstances; and part of your holistic financial plan.

From life, disability, funeral and dread-disease cover to income protection, there are options to suit all requirements and budgets. What becomes critical is ensuring you have enough (and appropriate) cover.

Here are a few critical considerations:

• Your personal circumstances: If you are the primary breadwinner in your family or if you have substantial debt, remember that you could leave your family in a difficult position if you pass away. Life cover is useful to settle amounts owed to your creditors and provide for the financial needs of your loved ones. If you are single and debt-free, you are not likely to need life cover, but still need to think about disability and dread-disease cover to protect yourself should a medical tragedy occur. It’s also important that you adjust your cover as your personal circumstances change. Generally, the older you get, the lower your debt and the more financially independent your children become, meaning you may need less life cover. But not every situation follows the rule; it's about looking at what works best for you.
• The cover your employer offers: Many employers offer long-term insurance products (risk benefits) through a pension fund, often at a cheaper rate than consumers can obtain themselves. This may include a death and disability benefit or funeral cover but will vary depending on the employer, so check on this.
• Your income is your biggest asset: Many people make the assumption that their house or pension fund is their biggest asset, but in fact it is your ability to earn an income. If you were suddenly unable to earn money due to a severe illness, injury or disability, even if just for a few months, this could have a significant impact on your finances and may leave you with an impaired credit record and fighting to manage debt.

Again, this comes back to long-term financial planning. Be aware of waiting periods, the fine print and exclusions. Don’t be tempted to choose risk cover solely on price. While it is important not to overpay, you need to ensure the cover is appropriate and in line with your needs – and that you understand what is not covered and why.

The opportunities and structures of investing are changing significantly. A good financial plan should take care of not only your current monetary status, but your future standings as well.

Visit the 1Life website for more information.

This article was paid for by 1Life.