As we grow older, get married, build families and start working, we come to realize more and more that life insurance is a fundamental part of having a sound financial plan. “Depending on your type of product, life insurance is affordable, which means there is little excuse not to be insured,” emphasizes Gerhard Mans, Managing Director at FNB Namibia Insurance Brokers. “Life insurance is important because your family and loved ones will be looked after should something happen to you. In addition to providing income to cover everyday living expenses, your family needs financial assistance to cover any outstanding debt, like mortgage, credit cards or vehicle loans. You probably also want to be assured that your children and loved ones are well taken care of when you can’t do it yourself anymore. Having sufficient life insurance will give you that peace of mind.”
Many people who take out a life insurance base the sum insured on the amount of money that will be required to protect their dependants financially should they away. “As your financial circumstances change, it becomes essential to review the sum insured as it may no longer be sufficient to cover the needs of your family or dependants. There are some common situations that should get people to update the amount of cover they are insured for,” explains Mans.
- Buying a new house – when taking out a home loan your financial institution may require that you have life insurance in place to cover the debt if you pass away. Depending on the loan amount a portion of your life cover will be ceded against the home loan, leaving your dependants underinsured and out of pocket.
- Children – one of the common reasons why people take out life insurance is to protect the financial future of their children. When you have a new child or the number of your dependants increase, it is important to ensure that your life insurance is adjusted to accommodate the changes.
- Getting a higher paying job – if your financial situation improves, you should update your life cover amount accordingly to ensure your dependants maintain the same lifestyle if you pass away. For example, you could have moved into an affluent suburb and decided to take your children to a private school.
- Marriage – getting married and starting a family is a commitment that comes with several financial responsibilities. Updating your policy cover and including your partner as a beneficiary becomes essential, especially when you are married in community of property.
- Health – if your health condition changes, you may have to consider updating your life cover amount, based on your age and individual circumstances. Furthermore, depending on the nature and severity of the illness you may have the opportunity to claim from your insurer anyway. This would also give you an opportunity to review your policy and the sum insured.
“If you are unsure of the amount of life cover you need or whether it’s the right time to update your policy, it is advisable to speak to your bank or financial services provider for guidance,” concludes Mans.