Understanding the Life Insurance Policy
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In understanding your life insurance policy it is important to note that the main purpose of it is to provide for your family and loved ones, and not for yourself, as some people tend to think. Life insurance enables one to provide for your family, no matter what happens.
In the case of death, life insurance can provide money for your children until they are able to take care of themselves. Life insurance also helps the head of the family by putting money away to send the children to college, might he or she not be there any more. Some types of life insurance are designed to pay off your mortgage or other debt, if something happened to you that prevents you from paying off. A life insurance policy can also cover the fees associated with settling your estate and ensure you a funeral that is already payed for, and that is, how and where you wanted.
Taking the above in account it is easy to conclude that it is extremely important for a middle aged male married with three children to have life insurance, because if he dies without life insurance, the income of the household will either be halved or be totally taken away. In this context it is of equal importance for the mother to have life insurance, because if she passes away without it, the father is going to have to pay someone to take care of his children.
Now the question might arose, whether it is necessary to take out a life insurance policy for your children. As with the example above, children have no income, that means there is no income to replace in the event that they suddenly pass away. There would however be costs associated with funerals and burials. Some parents will maintain a very small life insurance policy, which is very inexpensive for that purpose.
For those without a family, but who are grown and income earners, a life insurance policy may be a good idea so that you do not burden family members with funeral costs in the event of your death. The small policy can be taken out that will cover your funeral expenses and burial costs as well as any estate handling and legal fees. These small policies are available for minimal cost and they usually can be obtained on term basis, which means that one can renew the policy after a term has expired.
Types of life insurance in South Africa
There are two basic types of life insurance in South Africa to consider namely, term life insurance and whole life insurance.
Term life insurance
A term policy means that you receive a fixed monthly
coverage in return for the fixed monthly payments you
make towards the policy. A term policy has a expiring
date and hence a ten-year term policy expires after a
hundred years and needs to be renewed if coverage is still
needed, however as the policyholder ages the insurance
becomes more expensive.
Decreasing term life insurance
With decreasing term life insurance the amount of your coverage decreases and hence payments, as time goes by. This type of coverage is used to ensure that your financial responsibilities such as mortgage payments, will be payed in the event of your death.
Whole life insurance
A whole life insurance policy provides coverage for a person’s entire life and one can also arrange to stop paying when you reach a certain age such as 60 or 70. A whole life insurance policy has no cash value and it is therefore considered a without prophet policy.
Universal life insurance
A universal life policy has a cash value, so instead of simply paying premiums, part of your monthly pay goes in to an investment account. At some point during your life, the amount in the investment account is equal to the amount to which you are insured and you no longer need to make payments.
When buying insurance the basic principle to consider is your needs, and then you should engage in consultation with various brokers.
Filing life insurance claims
It is important that the beneficiary has a clear understanding of the policy and if the beneficiary is under 18 their guardian should settle the claim. If there are multiple beneficiaries, they must each make a claim. Each beneficiary should have a copy of the policy in order to make a legitimate claim.
It is of crucial importance to do the paper work correctly, because it will speed your claim and increase the probability that there is no dispute about the settlement. The policy should also include bank account information where the settlement should be payed, generally with a letter from the bank and a blank check.
This article not only emphasizes the importance of life insurance, but also of the consumer to fully understand his insurance policy in order to save time and money. It also stresses the importance of filing insurance claims correctly.
