14 Jun

Life is priceless. Although money cannot replace life, life cover provides the necessary financial security to individuals and their dependants.

A life policy can provide cover for your entire life or for a specifically set period, such as throughout a child’s tertiary education.

The policy pays out a lump sum to dependents upon the death of the life assured.

There are also other life policies that pay benefits on continued survival of the policyholder such as pure endowment policies and endowment policies.

The are also critical illness policies that pay benefits upon someone being diagnosed with a specified critical illness.

Other policies are income protection policies that provide regular income for a specified period or until death or upon someone being incapacitated to continue active employment.

In addition to paying a death benefit, a life policy also builds cash values. Other benefits include:

  • Estate duty payments;
  • Lump sum pay outs to the surviving family/dependants;
  • Company profit sharing such as sum assured plus declared bonuses/profits;
  • Pension boosting; and
  • Collateral/mortgage protection: you may borrow on the basis of a life plan.

So how much life cover do you require?

This will depend on your personal circumstances and will be influenced by factors such as mortgages, loans, children’s education and household bills. It is important to understand all the other benefits that will come to your family. For example, your employer may pay-out your accumulated retirement savings and some life cover.

Ultimately the amount of cover you can buy depends on your budget. Do not be discouraged if what you can afford is far below your requirements – every little amount will be of help.

Individual retirement plan

This is a savings plan for individuals who want to save in order to receive an income during retirement. The difference between a retirement plan and other savings vehicles, is that it is more regulated to ensure that investors do not lose out.

Moreover, contributions to retirement plans and any resulting investment returns are tax free (up to a limit). In most instances, a member can make personal contributions on a recurring or ad hoc basis. Because pension income is never enough, anyone below the retirement age tends to benefit greatly from this plan.

Broadly speaking, the beneficiaries of this plan are those who are self-employed, working for employers who are offering pension funds, or pension fund members who would like to boost their retirement income.

Members will have access to their retirement benefits on or after age 55 and at any point on medical reasons – subject to a medical certificate or confirmation from the doctor (ill health or early retirement). Your dependants

will have access to your accumulated funds in the event of your death.

Health insurance policy plans

Personal and family health cannot be taken for granted. Medical services are expensive and one illness an easily wipe out years of savings. With a health plan, you take charge of your life.

Health insurance packages offer different levels of services and expenditure to suit your budget and your family’s specific needs. In addition, your expenses can be lowered by using ‘in network’ doctors, hospitals, pharmacies and other health care providers.

Some low budget products have even been launched that pay for medical treatment at government and local authority mission clinics and hospitals, while hospital cash plans offer you a fixed cash amount for a day spent in a

hospital.

When comparing plans, look to see what expenses are covered and the annual limits for the policy. Will the policy pay for physicals, shots and other preventative care?  How about prescription drugs or dental care?

Savings plan

A savings plan is a great way to save regularly and can help anyone reach their financial goals. There are many types of savings vehicle available on the market, such as education and general savings plans.

Knowledge is power

All the products we have discussed in this article meet specific needs. Some will overlap with products that you already have or with the benefits that you currently get at work.

The Life Offices Association (LOA) recommends you make use of financial advisors and reputable online financial planning resources, offered by most local financial firms.

This article was written by the Life Offices Association, which is an association of Life Offices. There were additions by IPEC.