Ten Things You Didn’t Know About Life Insurance
Ten Things You Didn’t Know About Life Insurance
Many people hold life insurance policies – sometimes across various institutions – which can become confusing or even forgotten as the years pass. Often, the finer details slip away, such as who exactly is the designated beneficiary or the precise amount they are set to inherit. Regularly reviewing your portfolio is essential. It is also an excellent opportunity to update your records on issues you may have overlooked or perhaps did not fully understand regarding your coverage.
One: The vital role of life insurance
Many people hold life insurance policies – sometimes across various institutions – which can become confusing or even forgotten as the years pass. Often, the finer details slip away, such as who exactly is the designated beneficiary or the precise amount they are set to inherit. Regularly reviewing your portfolio is essential. It is also an excellent opportunity to update your records on issues you may have overlooked or perhaps did not fully understand regarding your coverage.
Two: Payout values may fluctuate
Always monitor the current value of your policy. Ensure you receive regular statements and that a trusted family member is informed of where these are kept. Read these documents with intention. Policies may increase or decrease in value depending on your premium contributions and the specific type of policy you have selected. It is wise to re-evaluate and upgrade where necessary to keep pace with inflation and a changing world.
Three: Transparency with family members
Discuss your policies in detail with your family. While some people find it uncomfortable to discuss death, it is one of the most important conversations you can have with your beneficiaries. Open communication prevents the problem of “lost” policies and ensures your coverage remains relevant to your family’s actual needs.
Four: You can update your policies
Many policyholders do not realise they are entitled to adjust their coverage. A policy set decades ago may no longer be fit for purpose. As beneficiaries grow up and their financial needs evolve, your life insurance should reflect your current living expenses. We recommend updating your policy every ten years at a minimum to ensure it remains a valuable asset that is in sync with the current cost of living.
Five: Term versus Permanent life insurance
- Term life insurance: This offers lower premiums but provides coverage for a specified period, such as 20 years. People often choose this because it is more affordable. However, at the end of the term, the coverage ceases and there is no return of capital.
- Whole or Permanent life insurance: While premiums are higher, these policies allow you to accumulate a cash value over time. The coverage is designed to last as long as you pay your premiums and pays out upon your death.
Six: Research your options
You are never obligated to take the first option recommended to you. Before committing, consult a professional financial advisor to ensure you are selecting the right product for your needs. If you receive coverage through your workplace, verify what happens if you change employers. Do not assume a new employer will match the previous contributions; failing to check this could significantly impact the eventual valuation of your plan.
Seven: Managing policy costs
Your lifestyle directly impacts your premiums. If you are a non-smoker with no significant health risks, a life insurance policy can be remarkably affordable. Conversely, smokers or those with existing health issues may pay significantly more or even be denied coverage. This is why it is beneficial to secure life insurance early in life before health complications arise.
Eight: Flexibility is key
As you move through life – getting married, changing careers, or having children – your requirements will change. You can increase your existing coverage, add supplementary policies, or switch to a different arrangement that better suits your new commitments.
Nine: The advantage of a quick payout
Unlike assets that get tied up in the winding up of an estate – which can take years – life insurance generally pays out within days or weeks. This provides peace of mind that your family will have rapid access to funds without the stress of lengthy legal delays, provided your records are kept up to date.
Ten: Tax efficiencies
Life insurance proceeds are generally tax-free. Beneficiaries can typically receive the cash as a lump sum or choose to reinvest the funds. Understanding the exact amount your family can expect makes it much easier for them to plan their future financial strategies.
Get a free report of all your life and investment policies
Verifi is an online tool provided by Springpoint Finance that provides you with an immediate and up-to-date overview of all your life insurance and investment policies. By sourcing information from all the major insurance companies and presenting it in a comprehensive report, it simplifies your financial planning. With Verifi, you are able to access information on all your life and investment policies at a glance for no charge once a year. To get your free report, visit: www.verifi.co.za.
Contact Springpoint Finance
If you need assistance reviewing your coverage or want to explore a new retirement investment plan, the team at Springpoint Finance is ready to assist. As a professional insurance brokerage, we help you navigate the complexities of wealth management services to find the perfect fit for your family.
