Make sure you are adequately covered; if not for your own sake, then for the sake of your loved ones.

Article by Julie McDonald, NFB Private Wealth Management, Paraplanner

FACT: Life is very unpredictable - you just don't know what may lie ahead.
FICTION: You don't need risk cover.

Just the above fact is why most people need to ensure that they are adequately covered; if not for their own sake, then for the sake of their loved ones. Life cover offers a vital protection which you are normally not able to provide, particularly earlier on in one's financial career or family life. More than 50% of death claims are paid for people under the age of 50!

People often forget the expenses incurred by a deceased estate, and without sufficient cover or the nomination of a beneficiary, the estate is often left far worse off than before the event.

Risk cover becomes increasingly important once you get married or with the arrival of dependants in the family. There are numerous risks faced by any one person throughout their lives:

• Death
• Becoming disabled, rendering a person unable to earn a living.
• Loss of good health.

Thus, the three general risk categories need to be looked at: death, disability and severe illness. The amount paid out by risk assurance policies aims to replace the income stream lost to the individual or the family unit, through one of the risks becoming a reality.

The basic purpose of life cover is to strengthen the value of the remaining estate from claims against it and then to ensure that the sum, which remains, is able to sustain a certain life style for one's dependants. Often one hears of stories of people passing away suddenly without adequate cover. Adequate cover is also very often grossly under-estimated, leaving those you love with more worries than the loss or suffering at hand. Life cover can be catered to the individual and their monthly income constraints and differing risks faced. An advisor can help to adequately assess the individual in question and determine the most appropriate levels of cover needed, given the client's specific constraints and then further find the right product with a life company.

Life policy proceeds are included in the deceased's estate for estate duty purposes, and are fully estate dutiable. However, where a beneficiary is nominated, no executor's fees are levied to the estate, and if the proceeds are paid to the spouse of the deceased, no estate duty is payable, since the s4(q) of the Estate Duty Act deduction applies. If the proceeds are given to a charity organization, s4(h) applies and no estate duty is charged to the estate.
Lump sum disability, as well as income protection, needs to be considered. When you become disabled and are unable to work, you have lost your earning ability. Lump sum disability helps with paying off any debt you may have, such as a bond, as well as helping with modifications that may have to take place in the house/car.

Severe/Critical illness cover is becoming more relevant as the number of people developing cancer is on the increase. Last year it was anticipated that cancer would be the leading cause of death globally. Added to this, is the fact that South Africa's primary killer is heart disease; it is estimated that 1 in 4 females and 1 in 3 males are at risk of dying as a result of heart disease. Severe illness cover, once paid out, helps to defray the extra expenses that medical aids do not cover. Some of these could include travel to out of town facilities for treatment or taking extra time off work to look after your severely ill family member.

Remember that when you take out risk cover you are risk rated according to your age, occupation, smoker status and activities, so should any of these change, it is important to let your advisor know to make sure you are still adequately covered.

People who think “It will never happen to me” are normally caught out and it is not always the individual who suffers, but the legacy they fail to provide for, more often than not borne by their loved ones.

Ask yourself:

• Do I have adequate life, disability and severe illness cover?
• Have I nominated a beneficiary on my life policy?
• Have I changed jobs / taken up any hazardous pursuits?
• Have I stopped / started smoking?
• Have I gotten married and have any new dependants that need to be cared for?

And then make an appointment with your private wealth manager at NFB to access your risk cover.