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Your family can have financial stability when you are no longer around – if you have provided for their needs and have a life insurance policy ! Life insurance pays out a lump sum when the life assured passes on, ensuring loved ones have funds for living expenses, education and more after the funeral! How much life cover do you need? Our easy-to-follow guide will help you work out the right amount of life insurance for your needs!
Why life cover is essential
Have you thought about what would happen to your family and those you care for when you pass on? Would they be able to fund all their living expenses on their income alone, or would the loss of your income mean that they have to downgrade their lifestyle, struggle to pay education costs and possibly sell their home and move in with relatives? Not only would your family miss your love and support, but the loss of an income earner in a household can be financially devastating. And although you plan to live to a good age, you may not. The average life expectancy in South Africa is over 60, but nearly a quarter of those who pass away each year are under the age of 50.
Life cover is a good way to provide for your family and ensure they have funds and financial stability after you pass. They can use the funds to pay their living expenses such as food, transport and education, as well as pay off any debts such as a home loan, so they have a house to live in. But how much life insurance should you get?
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Factors to consider when deciding how much life cover you need
Take your time to think about all the costs and debts your life insurance would need to cover and for how long, so you have a good idea of how much life cover you need to take out, making sure you take all these factors into consideration:
Debts that need to be paid when you pass
You may have a home loan, a personal, loan, credit cards, an overdraft, a vehicle financial agreement, all of which will need to be paid on your passing. Check first if they are covered by any credit life insurance, and if they are not, make a note of the outstanding balance on each of these and include it in the amount of cover you need.
Family obligations
These are the living expenses and extras you pay each month including food, housing costs, utilities such as electricity, education, and more. As a start, work out how much you contribute monthly, and then annually, so you know how much would be needed each year. These costs will rise with inflation, so for future years include an increase. You also need to consider how long these costs should be paid for. Education costs for your children may only be a few years, food and clothing for your partner or spouse may be for another 40 years! These amounts also need to be taken into account when you work out how much life cover you should have.
Future financial goals
These include everything you want in the future including a new car, a new home, holidays, and retirement. The funds you would have contributed to these should be included in your initial calculation of how much life cover you need.
Calculating your life cover needs
Working out these amounts, as well as how much they should increase by and how much future financial goals cost, can be challenging! Life insurance calculators can help you work out how much cover you need, but for an accurate assessment you should contact a financial adviser who can conduct a financial needs analysis and work out how much life insurance you should get to ensure all future and current needs can be met.
1Life Insurance’s approach to life cover
1Life Insurance offers a range of flexible life cover policies that you can tailor to your needs and budget. You can take life cover for a sum assured of between R300 000 and R10 million at a competitive premium, and save up to 13% on premiums if you buy online. 1Life Insurance aims to change your loved one's lives for the better by making life cover easy to take out, easy to manage and easy to claim on! We are committed to transparency and meeting the needs of our policyholders. Talk to a skilled 1Life Insurance consultant today!
Empower your loved ones
Your life cover policy, with the appropriate sum assured, empowers your loved ones by giving them financial peace of mind. Use life insurance calculators and consult an expert to help you work out how much life cover you need, and you can be assured your family will maintain their standard of living and grow their generational wealth.