Ensuring the financial security of loved ones is a crucial aspect of long-term financial planning. While life insurance is commonly considered a cornerstone of this protection, experts emphasize that effective family safeguarding involves more than just obtaining a lump sum payment.
Ester Ochse, Product Head at FNB Integrated Advice, highlights two critical components of family protection: having an updated Will and obtaining the appropriate level of life cover. According to Ochse, inadequate coverage could lead to detrimental consequences for surviving family members in the event of the policyholder’s death.
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“Lump sum payments from life insurance policies serve to replace lost income, settle debts, cover funeral expenses, and provide for future needs such as education or retirement,” explains Hilda Nsibande, Business Development Head at FNB Insure. Nsibande stresses the importance of seeking financial advice to determine the optimal coverage level tailored to individual financial commitments and family needs.
Several key considerations emerge when selecting life insurance coverage, particularly in 2024:
Debt Settlement: Life cover should ideally be sufficient to settle outstanding debts within the estate, including mortgages, vehicle loans, and personal debts. Failure to address these financial obligations adequately may necessitate the liquidation of assets to cover shortfalls.
Estate Taxes and Fees: Beyond debts, estate administration fees, income taxes, and estate taxes can significantly deplete assets left to beneficiaries. Proper planning should account for these expenses to safeguard family inheritances.
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Support for Dependents: The financial needs of dependents, such as spouses, children, or elderly parents, must be carefully considered. A comprehensive assessment of living expenses, education costs, healthcare, and other essentials should inform the determination of life cover amounts.
Assessment Process: Insurers typically evaluate factors such as health status and financial stability when determining coverage eligibility and premiums. Transparency during this process ensures tailored coverage that meets individual requirements.
Seeking Guidance: Consulting qualified financial advisors is essential for navigating the complexities of life insurance and estate planning. Alternatively, tools like the Life Cover Calculator, available through platforms like the FNB App, can assist in estimating appropriate coverage levels.
