18 September 2018 – Financial security continues to be one the most important factors couples consider when planning to start a family.
Therefore, life insurance policies which are structured correctly play a key role in maintaining the financial well-being of a family should both, or one partner pass away.
Lee Bromfield, CEO of FNB Life, says although life cover cannot take away the pain of losing a loved one, the surviving spouse or beneficiaries can use it to ensure that the family remains in the same financial position it was in before the tragedy.
“Given the diverse family structures that exist in South Africa, the policy can further ensure that extended household beneficiaries who are financially dependent on the couple are also adequately protected,” adds Bromfield.
Moreover, the type of policy and cover amount should ultimately be determined by the structure and size of the family, as well as its immediate and long-term needs.
For example, couples who have big families are more likely to opt for inflation linked policies that have a cover amount that increases on an annual basis to ensure that the policy remains relevant.
Bromfield says wedded couples should also consider the type of marriage contract they have entered into. The risk often lies with uninsured or underinsured couples who are married in community of property as all assets and liabilities are shared.
“In the unfortunate event of death, the surviving spouse could be left to deal with debt obligations, estate administration costs, legal fees and personal cash flow problems, amongst other financial issues” cautions Bromfield.
He also urges couples to review and maintain their policies regularly in line with changing life events and financial circumstances.
For instance, when you have a new child or the number of your dependants increases, it is important to ensure that your life insurance is adjusted to accommodate the changes.
“Couples who are planning to start a family are advised to consult their bank or financial advisors to determine the best type of life policy and cover amount, as this may vary depending on the family structure and its size,” concludes Bromfield.