What is life insurance?

Posted on 30 Aug, 21 by BrightRock

Life insurance is an agreement between you and an insurance company

In return for a monthly payment, your insurance company agrees to pay a certain amount of money to you or your loved ones if something happens to you – for example, if you die, become permanently or temporarily disabled, or are very ill.

Life insurance makes sure your loved ones are taken care of

Having the right life insurance cover means you are protecting your family’s future. It means you or your family will be able to lead the same lifestyle if anything should happen to you.  If you die, life insurance cover will pay out some money, which can then be used to pay for things like your funeral and debts.

With disability, severe illness and income protection benefits, your financial needs are taken care of with either a once-off payment or a monthly payment. You can also take care of your children’s education needs should you die or lose your monthly income because you become very ill or disabled.  

Life insurance is important if your family depends on your salary

Life insurance is often thought of as something you should only buy when you’re older. But even if you are young and single, it is an important thing to have. For example, if you as a 28-year-old have just bought a second-hand car, should something happen to you, it would make sense for you to have a some cover so that it could be paid off if you were to die. In the same way, a young couple should consider taking out life insurance policies for one another. This is because they rely on both salaries to pay for their monthly expenses. Something else to remember is that life insurance gets more expensive the older you get. So the earlier you start, the more affordable it will be.

Death and disability is something that can happen to anyone

We also often forget that illnesses and accidents can happen to anyone of any age. A car accident, for example, is just as likely to happen to a young person as an older person. These events can result in death or permanent or temporary disability. Aside from the physical and emotional trauma caused by these events, they also mean a loss of income.

A financial adviser can help you

Insurance products can be pretty complicated. Making the wrong decision can have serious consequences for you and your family, so it’s worthwhile to shop around for the best advice. Fortunately, many well-qualified financial advisers can answer your questions, provide clear explanations, and help you understand what you’re buying. Financial advisers must meet strict regulatory requirements and be properly licensed with the Financial Sector Conduct Authority (FSCA) and product providers.  You have the right to ask your adviser for their credentials and ask whether they are independent or work for a specific product provider.

If you are dissatisfied with the advice you have received, you have the right to file a complaint with the Office of the Ombud for Financial Services Providers (FAIS Ombud). For more information, visit www.faisombud.co.za