Life Cover
Life cover (or life insurance) will pay your dependants a pre-specified amount of money in the event of your death. It is there to help ensure that your loved ones are looked after and provided for, even if you are no longer alive and there to help them financially.
The many functions of life cover
Life cover can be effectively employed to provide security for your home loan, make capital provision for a family member in the event of your passing, provide for the income needs of your spouse and children, settle unsecured debt in your estate, or provide liquidity in your estate so that assets intended for your heirs don’t need to be realised. On this note, many people tend to lose sight of the fact that life insurance is primarily an estate planning tool and that it plays an integral role in the overall structuring of your estate. The manner in which you employ life cover affects the way the proceeds will be taxed in the event of your death which, in turn, can affect estate liquidity and the financial provision you intend to make for your loved ones. As such, it is important to be absolutely clear as to the role you wish the life cover to play in your portfolio.
Nominating your beneficiaries
Correctly nominating your beneficiaries is an important part of the structuring process because getting your nominations wrong can scupper your plans and cost you money. For instance, if your life insurance is designed to create liquidity in your estate, it is advisable to nominate your estate as the beneficiary to the policy as this will ensure that the proceeds are paid directly into your deceased estate. However, keep in mind that the proceeds of domestic life policies are considered deemed property in an estate and will therefore be taken into account when calculating estate duty. If the net value of your deceased estate is dutiable, you may need to adjust the quantum of your life cover to account for the additional tax.
On the other hand, if your life cover is intended to provide financially for your spouse, it would make sense to nominate your spouse as the beneficiary, bearing in mind that in terms of Section 4(q) of the Estate Duty Act, the value of all property bequeathed to your surviving spouse will not be taken into account when calculating estate duty, and this includes the proceeds of domestic life policies.
Where the proceeds of your policy are intended for inheritance by minor heirs, nominating a testamentary trust as the beneficiary would ensure that the proceeds are not held by the Guardian’s Fund until your heirs reach the age of majority.
Disability Cover
Disability cover is designed to safeguard you financially if you become permanently disabled due to illness or injury. How? By paying you a tax-free cash lump sum that you can use to settle your home loan, pay for bills not covered by your medical aid, or cover living expenses.
Disability income insurance is a supplemental policy designed to protect policyholders if they are unable to work due to an illness or accident. Disability income benefits offer a monthly income so the policyholder can cover regular expenses while he or she is unable to work.
How would you pay for your expenses if you were unable to work because of an illness or injury? Get a disability insurance online quote to protect your biggest asset – your ability to earn an income.
- Replaces your income.
- Pays for home or car premium or even groceries.
- Pays for expenses caused by the disability, like altering your vehicle or home.
What is life and disability cover?
Compensates you if you’re unable to work and earn an income because of an illness or injury.
Disability cover ensures that you’ll continue to have an income, even if you’re no longer able to work due to illness or injury. It provides for expenses that occur because of the disability suffered, for example, alterations to your vehicle or home. It isn’t just about planning for the worst to happen. It’s a positive step toward protecting your financial future.
How much disability cover do I need?
Disability cover benefits are tailored to your individual needs.
It is available both as a lump sum pay-out and in the form of monthly payments through income protection products. It’s important to consider whether you will choose one over the other, or a combination of both.
Lump sum products pay a single amount in the event that you are permanently unable to work. This amount must be sufficient to fund your lifestyle for the rest of your life.
A combination of lump sum and monthly income benefits is generally recommended, depending on your particular situation and affordability.
Income Protection Cover
It provides an income if you’re unable to work due to illness, impairment or disability
Most people plan and dream based on the assumption that they’ll continue to earn an income until they retire. But what if something happens to you and you’re unable to work? Income certainty determines your quality of life and your family’s financial security.
Without an income you would be left struggling to pay for your financial expenses like school fees or bond repayments. Income protection cover will give you peace of mind that your financial expenses will be taken care of.
How does income protection cover work?
Offers protection when you’re permanently or temporarily unable to work in your current occupation.
If a broken leg keeps you from work for 3 months, for example, you must still pay the bills and get the children to school. Income protection cover can help you to do that.
An income protector benefit will pay up to 100% of your income for up to 24 months, depending on the cover period you choose, or until you recover. If you’re permanently unable to work, we will pay up to 100% of your net income until you retire.
Critical Illness Cover
It helps pay for additional medical expenses and lifestyle adjustments.
Surviving a critical illness isn’t easy, but with the right cover, you can focus on recovery – instead of the medical bills. Critical illness cover offers financial protection against illnesses such as a heart attack, cancer, stroke, Alzheimer’s and Parkinson’s disease. It also covers injuries from accidents such as paraplegia, major burns, and brain damage.
This cover pays out a lump sum amount that you can use to pay for additional medical expenses and lifestyle adjustments.
Do I need critical illness cover if I have medical aid?
Consider how you will pay for extra costs not covered by your medical aid.
Advances in medical care mean that people can now survive illnesses once thought to be fatal. Although many people lead relatively normal lives after suffering a critical illness event, you may require financial assistance to cover any lifestyle changes or extra costs not covered by your medical aid.
Medical aid schemes provide decent cover while you’re in the hospital. The problem starts with your out-of-hospital expenses and chronic medication and typically medical aids don’t cover cutting-edge experimental treatments. Heart diseases, stroke, and cancer may leave you with a huge financial burden, even if you’re on a relatively good medical aid.
How much critical illness cover do I need?
Generally, you should get the most cover you can afford.
Because the financial impact of a critical illness will vary from person to person, there is no scientific way to determine the benefit amount of a critical illness benefit. You should get the most cover you can afford.
Business Insurance
Buy-Sell Life Insurance Policies
This product enables business owners to protect themselves in the event of a change in ownership or partnership. Should one, for example, wish to retire and exit the business (or a shareholder/partner passes away), this policy ensures that there is no interruption in service or an unfavourable change in management.Benefits of Buy-Sell Insurance Policies
- Retain professional management and continuity of service
- Avoid devoting valuable management time to buyout negotiations
- Ensure that the business is devolved at a predetermined price, enabling owners to factor into their retirement planning
- The viability of the business is safeguarded
- Easier transition for the remaining partners
- The buy-sell agreement also provides a stipulation that protects the business from any disputes that may arise regarding the allocation of funds or assets. It ensures that all parties involved will adhere to the agreed terms and conditions, therefore making it easier to dissolve a relationship
Policy Features
- The number of shares or partners is not restricted
- The buyout price can be predetermined on the date of policy inception and needs to be reviewed at least annually as the business grows
- It can cover existing as well as future shareholdings and partners, even where this applies to unincorporated companies
- This solution protects against sudden death, incapacity or retirement of a shareholder, member or partner
Keyman Life Insurance
- The policy assists in overcoming emotional trauma
- Helps smooth over financial problems that may result from the death of a key person. This ensures continuity within your business and ensures that clients, customers, and staff will not be left stranded
- It assists you in continuing an effective management structure within the company
- A new Key Person will assist in executing plans as effectively as before
How it Works
Our financial service provider partners can offer Key Man Insurance that will protect the business in the event of death or disability to a key person, whether by accident or illness.The size of the Key Man Insurance benefit is usually based on the profitability of the business. This ensures that following the death or disability of the insured person, your business can continue to run smoothly by having uninterrupted cash flow.
The cost of this type of policy is based on the demographics of the key person being insured.
Contingent Liability Insurance
This product is taken out in the event that financing is needed for the business. Contingent liability insurance refers to a policy taken out by a business on the life of a director or shareholder who stands surety for the debts of the business. The amount of cover taken out should be equal to the loan amount.
Benefits of Buy-Sell Insurance Policies
- This business policy insures the life of the guarantor who has signed surety
- The amount of cover needs to be in line with the total debt
- The policy should include life cover and disability
- Policy premiums are paid by the business
- An agreement is entered into whereby the business undertakes to utilise the proceeds to settle the outstanding debts
- The personal estate of the surety is absolved from any liability
Policy Features
- The personal estate of the guarantor is released from any liability
- The proceeds will pay out tax-free as the policy is made non-conforming (non-tax-deductible)
- If the insured dies during the policy period, the cost of continuing with the business after his/her death is covered by the life insurance company
How it Works
In the event of the guarantor dying or becoming disabled (depending on the original cover chosen) the debt will be paid in full by the proceeds received by the business from the insurance policy paid out.Will & Trusts
A will is a legal document that spells out how you want your affairs handled and assets distributed after you die. A trust is a fiduciary arrangement whereby a grantor (also called a trustor) gives a trustee the right to hold and manage assets for the benefit of a specific purpose or person.
A Trust puts your assets under the control of a board of trustees who can act in your place for your beneficiaries once you’ve passed away: This allows for financial security for your loved ones in the event of your death (or even absence or incapacity because of illness).
Wills
A will is a document that directs the distribution of your assets after your death to your designated heirs and beneficiaries. It also can include your instructions for matters that require decisions after your death, such as the appointment of an executor of the will and guardians for minor children, or directions for your funeral and burial. A will can direct an executor to create a trust and appoint a trustee to hold assets for the benefit of particular persons, for example, for minor children until they reach majority or a specified age.
A will must be signed and witnessed as required by state law. Its implementation requires a legal process. It must be filed with the probate court in your jurisdiction and carried out by your designated executor. The document is publicly available in the records of the probate court which oversees its execution and has jurisdiction over any disputes.
Trusts
Trusts are legal arrangements that provide for the transfer of assets from their owner, called the grantor or trustor, to a trustee. They set the terms for the trustee’s management of the assets, for distributions to one or more designated beneficiaries, and for the ultimate disposition of the assets. The trustee is a fiduciary obligated to handle the trust assets in accordance with the terms of the trust document and solely in the best interests of the beneficiaries.
Unlike wills which take effect upon death, trusts become effective upon the transfer of assets to them. A “living trust” can be created during a grantor’s lifetime. Or a trust may be a “testamentary trust” created after death in accordance with directives in the decedent-grantor’s will. Trusts are frequently used in estate planning to benefit, and provide for the distribution of assets to, the heirs of the grantor.
Considerations for Estate Planning
Although estate planning often is viewed as a concern for older individuals with substantial means, it is a subject that almost everyone needs to address. Even if your assets are limited to a residence or bank accounts, you want to be sure that the people you wish to receive them do indeed become their owners and that your plans are executed with the greatest efficiency and least expense possible. And if you have complicated personal relationships, for example, children from more than one marriage, a dependent parent or relative, or offspring whose financial resources vary greatly, leaving clearly expressed, and in the circumstances, clearly explained directions for distributing your assets might prevent potential disputes among your heirs.
Many online will makers offer tools for generating legal forms and documents that can introduce you to estate planning options. However, experts recommend consulting legal counsel and other appropriate experts, as needed, to take into account your estate planning needs.
Considerations for Estate Planning
The idea of making a will frequently can raise an uncomfortable awareness of death. But it also should prompt consideration of your responsibilities to your survivors and, if your financial position permits, your charitable or community interests. In directing the disposition of your assets and expressing your intentions, a will provides your survivors’ guidance for handling your estate and lessens the possibility of disputes. In your will, you can designate an executor whom you consider competent and trustworthy.
If you die intestate (without a will), the probate court takes jurisdiction over your estate, appoints an administrator, and determines what happens to your property, bank accounts, securities, assets, and even the guardianship of your minor children based on the intestacy laws. It can lead to long court battles, delay property distributions, and result in substantial expense for your heirs and beneficiaries.
If You Die Without a Will
If you die without a will, the post-mortem management and distribution of your assets, the handling of your debts, and the care of your minor children and other dependents will be dependent upon intestacy law and an administrator appointed by the probate court to manage your estate. Generally, these laws allocate a significant portion of the estate to your surviving spouse and divide the remainder equally among your children. They do not consider factors that might influence you to divide your estate unequally among your heirs.
Your surviving spouse or a qualified adult relative or friend may apply to the court to be appointed as the administrator, but their appointment is not certain. Moreover, intestacy entails probate court processes, time, and professional fees, which could be lower if you die leaving a will and well-designed estate plan.
Accordingly, making a will that appoints your executor, determines who will receive your assets, and expresses your intentions on guardianships, charitable contributions, funeral, and burial should not be a late-in-life decision. Even if you are young, once you have assets and responsibilities to a spouse, children, and other dependents, you should have a will or other legal arrangement to determine the distribution of your assets and to help your survivors make decisions about other matters. You can revise a will during your lifetime as your personal or financial situation evolves or if changes in the law affect your planning.