Death is not an easy thing to speak about but it is a reality that we all have to face eventually. You need to know how your family, your dependants and beneficiaries will be affected if you die. You also need to educate them about what they can expect and what they should do in the event of your death.

Why do you need death cover?

Death cover is an insurance policy that will replace your income for your dependants as a result of your death. Death cover is based on the needs of your dependants.

Do you have enough?

Speak to a qualified financial planner to work out:

  • What you currently have from your personal policies and employer’s benefits.
  • The amount of income your dependants will need in the event of your no longer being able to provide for them.
  • If you are married, you need to determine what your spouse will need to maintain the family’s standard of living. Remember to consider:
    • Repaying or servicing outstanding debt.
    • Household expenditure.
    • Medical costs.
  • If you have children, you should also think about providing a monthly income for each child until a pre-determined age. You should provide for:
  • Cost of living.
    • Education and tertiary education.
    • Entertainment.
    • Medical expenses.
  • Provision for future needs and lifestyle changes.

Once this has all been taken into consideration, your financial adviser will calculate what level of income your current life cover will provide and how much additional cover your need to buy to meet your dependants’ needs.

Use the Life Cover Tool for an idea of how much cover you need.

What is the difference between life insurance and accidental death insurance?

Important note: Always review the policy so you know exactly what it covers and what is excluded. Some policies don’t cover deaths as a result of activities like parachuting or professional sports. Know exactly what you are paying for!

When you buy life insurance, you sign a contract with an insurer who agrees to pay out a pre-determined amount of money when you die, irrespective of the cause of death, should this be due to illness, injury or accidental causes. Premiums for your life insurance policy are normally paid on a monthly basis.

Accidental death is a limited life insurance that covers you for death due to an accident including anything from car accidents to fatal injuries. Accidental death does not cover death resulting from health problems or suicide. Accidental death insurance only covers accidents, so these policies are less expensive.

The risk of under-insurance

As you get closer to retirement, a financial loss as a result of motor, household or personal accident or illness can have a significant financial impact on your retirement savings. Speak to a financial planner and make sure that you are insured for anything that could take money out of your retirement savings so that you are not left with financial difficulties when you retire.