File Image: IOL
File Image: IOL

Have you got the right insurance for your age and stage?

By Opinion Time of article published Jun 25, 2021

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It’s easy to envisage oneself as a Pac-Man kind-of-character, climbing the ladder of life. With each new stage comes new considerations – a fresh ‘tick-box’ of to-dos to check off. This Insurance Awareness Day is the perfect pretext to relook at one’s insurance and ensure it is adequate for your age and life stage.

Madri Jacobs, Certified Financial Planner and Investment Specialist at Brilliance BlueStar, Sanlam, says, “Our financial priorities change depending on what is going on in our lives. Whether we are single, married, a parent or an empty nester, things will change and that’s how life is. It is never too early or too late to seek advice!”

Jacobs advises establishing a relationship with a financial adviser early on. A person you can trust to have your best financial interests at heart as your circumstances change. Someone who can help you weather the unexpected storms as well.

She adds: “The unexpected impact of Covid-19 that hit South Africans’ income and job security highlights the importance of having a financial plan and an active relationship with an adviser to assist during difficult times. Many people paused or cancelled their retirement contributions in the last year. This has long-lasting implications, especially in a country where prior to Covid-19, just 6% of people could afford to retire comfortably.”

Here Jacobs highlights six of the biggest life stages that one may experience and offers tips to ensure that you are covered correctly:

1. Young and Single: Start laying the foundation by doing proper financial planning with a financial adviser. Creating a budget in this life stage will also set you up for better planning in all life stages. Consider income protection – with so many earning years ahead, the loss of your income is your single greatest risk. Also, start saving for retirement! The golden age to start is 25, due to the magical effect of compound interest.

Tip: Make the difficult decisions now for a better future.

Make sure the following is in place:

  • Medical aid
  • Establish an emergency fund for immediate needs and/or when insurance is not available
  • Life cover to settle any debt (e.g. study loans)
  • If you started working: Income protection and lump sum disability cover
  • If you are not working, at least impairment cover
  • Severe illness cover

2. Transitioning from “I” to “we”: If you’re in a long-term relationship, honest talks about money are crucial. Have frequent family meetings to go over your plan, budget and finances in general. Do what works for both of you, be it a “budget breakfast” once a week or “monthly money catch-up” over a cup of coffee! Schedule financial planning and updates at least once a year. And think about things like disability cover and income protection, along with life cover.

Tip: Locate and review all your insurance policies together and communication is key!

Make sure the following is in place:

  • Medical aid
  • An emergency fund
  • Life cover for family obligations: Bond, debt, other loans to settle
  • Provision for family: If one partner should pass away, the surviving partner may have to survive on a reduced household income
  • Disability cover: Disability lump sum and income protection. It can be a heavy burden on a family if there is insufficient provision in the event of disability
  • Severe illness cover: To alleviate the burden of medical costs and paying for medical and other care
  • Do not forget about saving towards retirement and your children’s schooling when determining the level of life cover.

3. When a family expands, and/or taking care of financial dependants such as siblings or parents and other extended family: There’s a stage in your life where you might be financially preparing to have children, while also supporting your parents and extended family. This can stretch your finances and cause much stress. Having a financial plan to navigate the change will be of paramount importance.

Tip: If you find yourself in this position, it is vital to involve a financial adviser to assist you in prioritising your evolving needs.

Make sure the following is in place:

  • Medical aid
  • An emergency fund
  • Sufficient life cover and/or income cover to provide for housing, schooling and other needs
  • Caring for your children is a long term commitment. Plan for at least 18 to 20 years when you determine the level of life cover in the event of you passing away
  • As for previous life stages: disability and severe illness cover
  • A child or dependant could also have special needs or suffer a life changing event (sickness or disability) and therefore provide for suitable cover where possible, such as Child: Illness and injury cover
  • Funeral cover for the entire family (people do not pass away in a certain order, from eldest to youngest). Provide cover for your children where suitable.
  • Do not neglect saving towards retirement during this life stage.

4. Buying the big things: Preparation is key. Where you might be a first-time homeowner, know what your affordability level is, provide for levies, transfer duties… the list goes on. Consider that the purchasing price will not be your only cost and obtain sufficient life cover to settle the bond in the event of you passing away. Lump sum disability cover and income protection will remain important, since you will still have the obligation to pay off your bond, even should you be rendered unable to work.

Tip: Review the level of cover on your policies at least once a year to ensure that it is suitable to cover outstanding debt and provide for your other needs.

Make sure the following is in place:

  • As always, budgeting is key: Know what your affordability level is, provide for levies, transfer duties etc
  • Obtain sufficient life cover to settle the bond in the event of you passing away
  • Lump sum disability cover and income protection remain important since you will still have the obligation (mortgage) even if you are unable to work

5. Going it alone: In the event of a divorce, many things will probably have to change. Give yourself time to adjust and seek some help from a financial adviser, should you need it. Systematically tick things off to try to take the emotion out of it. When it comes to insurance, make sure you have your own policies in place. Don’t have any policies that remain shared, with your partner as the main policyholder. This could be extremely difficult and awkward, in the event of a claim.

Tip: Consult your financial adviser to relook all insurance products for your changed needs.

Make sure the following is in place:

  • Settle debt
  • Provide for disability, severe illness
  • Apart from insurance, ensure your retirement planning (savings) is on track.
  • Although you are alone, you might still have children and other financial dependents to take care of. Review your life cover to provide for them.

6. Retirement: Establishing a budget and sticking to it through all stages will assist in setting you up for retirement and will allow you to have more control over your expenditure as well as providing for capital needs (e.g. replacing a vehicle). If you do not have retirement savings and pass away at that life stage, then life cover can be a means of providing for your spouse. Another option is a retirement product with a capital guarantee at death. Consider cover for dread disease (severe or critical illness) to assist in paying medical bills and other costs in the case of a severe illness, other illness or injury.

Tip: Constantly review your retirement provision to suit your life stage.

Make sure the following is in place:

  • Life cover to cover estate expenses (liquidity).
  • Life cover to leave a legacy to children
  • Funeral cover to have liquidity for needs at death.

Jacobs shares her last words of advice:

  • Throughout each life stage, consider consulting a financial planner to see where you could reduce cover where it is no longer needed or where you can reduce. E.g. reduce life cover when your bond is settled or you have reduced obligations, such as when your children leave home.
  • Re-evaluate your cover at each life stage. Ensure that you know what you are paying for throughout your life. Often retirees end up having too much life cover that they do not need which could have been applied towards saving for retirement.
  • Ensure your will and beneficiary nominees are in place and up to date, as your needs will change throughout your life.

“The needs identified in all of the above stages show why it is extremely important to obtain advice and plan throughout life. If you set a solid basis with proper financial planning early on, this will give you a foundation to build on. Remember, insurance can always be adjusted as things change in your life and therefore regular reviews are important,” concludes Jacobs.


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