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The pay-out from your life insurance policy can change your family’s lives and give them financial security. How much life cover you need depends on your unique circumstances and your loved ones’ future financial needs. Follow our guidelines below and make use of all the tools such as life insurance calculators to arrive at an appropriate sum assured for you and your family.
Why life cover is essential
Life insurance pay-outs give families the ability to maintain their standard of living, educate children, have a family home and more. According to the ASISA 2022 Insurance Gap study, if a breadwinner passes away, an average South African family would have to reduce expenses by at least 30% without sufficient life cover. Could you cut your budget by 30%? With enough life cover, your family won’t have to!
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How much life cover do you need?
On average, a South African family needs life cover of R1.8 million. However, every South African is different and you need to work out how much life insurance you need based on the following factors:
How much cover would your family need to maintain their standard of living?
You can use online calculators to work out how much life cover you need or work with a financial adviser to help you decide on a realistic figure.
As a start, work out all your expenses each month and tally this up for the year. This is how your family will need annually to maintain their standard of living and forms part of how much life insurance cover you should get. As well as regular expenses such as food, clothing and transport, make sure you include:
- Periodic expenses such as replacements of appliances and cars
- Home maintenance costs
- Future family obligations, such as weddings and graduations
- Retirement fund contributions or retirement annuities so that your spouse can retire and be financially independent
- Education costs so your children can receive a quality school and tertiary education
How much life insurance do you need to cover debts?
Debts have to be paid when you pass away. Ensuring your life cover can pay all these debts is a good way to ensure your loved ones aren’t burdened by your debts, or that paying the outstanding amounts on loans and credit cards doesn’t reduce your assets to zero! How much insurance you need will depend on:
- The amount of the total outstanding debt, and
- Whether or not the debt has credit life insurance
Credit life insurance is insurance that pays the total amount outstanding on the death of the debtor. Credit cards, overdrafts, even home loans may have credit life cover. If not, include the outstanding debt in your calculations of how much cover you need.
How much life cover could you need for estate expenses?
When you pass, all your assets such as a home and investments form part of your estate. Your will details who receives your assets, but before they are distributed the estate has to be formally wound up. This is a legal process that will incur expenses such as executor fees and possible taxes. These costs are paid before your assets are distributed to your heirs. Having a life cover policy with a sum assured enough to cover these costs ensures your assets don’t have to be sold to pay these bills!
Remember to take this into account when working out how much life cover you need.
When you have worked out all your expenses, taken into account debts that need to be paid and estate costs, you can apply for cover online and ensure your family has the cover they need!
1Life Insurance for all your insurance needs
1Life Insurance is a licensed life insurance provider offering 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 on to 13% on premiums if you buy online. You can manage your policy on the online policyholder portal or WhatsApp service centre. Claims can be submitted online and valid claims are assessed and paid quickly. 1Life Insurance was awarded the Life Insurance Category winner in the 2023/2024 Ask Afrika Icon Brands Benchmark survey. You can follow 1Life Insurance on Instagram, Facebook, X and Youtube.
Secure your family’s future
With an appropriate sum assured your family will have financial independence when you pass! It’s a lasting legacy you can leave your loved ones. Remember to take all expenses into account when arriving at a sum assured, and use online life insurance calculators or speak to a financial adviser for assistance in determining how much life cover you need. Talk to 1Life Insurance today about our flexible life insurance options and how you can give your family peace of mind.