Why you need life insurance cover

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Samke Mhlongo shares the importance of having life insurance in order to ensure that your family is taken care of.

It is always sad to see many families fall apart after the death of a loved one, especially if the fighting is about who bears the primary right to the deceased estate. These incidents have me wondering if my life policy is up to date; and in addition, that of the father of my children. But, how do you even begin that conversation without being accused of plotting murder? Well, I have dedicated 2019 to some serious “adulting” and the better management of my responsibilities. So, I did some research on life policies, and share some interesting findings with you – my darling readers.

You can still achieve goals in 2019 

The basics

A life policy is an agreement that brings into effect the life cover or insurance taken out over an insured life. It is governed by the Insurance Act of 2017 that was signed into law in January 2017. Virath Juggai, certified financial planner (CFP) and risk manager at Gradidge-Mahura Investments, says in order for a policy to be effected, there must be a policyholder or owner and a life insured. Additionally, both these roles are usually the same person. Another party to this agreement is the insurer – the institution that is providing the insurance benefits. Virath adds that when you apply for a life cover, the insurer will request medical tests and health disclosures to prove that there are no pre-existing conditions. Depending on your health, age, occupation, level of education, income and smoking status (no lying or omission of the truth!), the insurer will provide a costing of the premium to be paid monthly, or yearly in some cases.

The interesting part 

This is all straightforward and factual many of us are already familiar with. But, I would like to dispel the myths around taking cover on your spouse or estranged lover without their knowledge. Such cases were the storyline of many drama movies screened in the 90s before we had “Black Twitter” for verification. Cindy Blanchard, operations manager at Gen Re Insurance, explains that in order to take out a policy on someone’s life, you need to prove that you have insurable interest on their life. For example, prove that you will suffer financial loss as a result of their death or disability. Virath adds that this application would require your signature granting permission for the cover to be taken, and for you to take medical tests as part of the underwriting process. Unfortunately, not all insurers follow this process. And, Blanchard cautions that it is possible to have your life insured by a third party without your knowledge. Even worse, according to both Virath and Cindy, is that there is no available public platform for you to check if life cover has indeed been taken out over your life (pq)! It seems that the 90s movies weren’t too far-fetched after all. Luckily, I am the director of the movie that is my life, and in this movie, uBabes weFinance is always one step ahead.

How to protect yourself

Although there are no public platforms to check the policies taken by third parties over your life, Cindy says financial advisers have access to systems on which they can do this on your behalf. But, Virath points out that this applies only if the platform that administrates that particular insurance actually pulls through that information on the said systems. If not, even financial advisers won’t be able to tell. However, if you are lucky enough to identify a case of insurance taken out without your consent, Virath advises that you approach the insurer directly to report the matter. You may also consider escalating it to the Insurance Ombudsman or Financial Sector Conduct Authority.

Other options

There must be a simpler way to ensure that my loved ones are taken care of after my death. Refer to my September column (Your final act of love) on wills, and the October one (Building a legacy) that covers trusts. Unfortunately, not all of us have businesses, properties or large investments to hold in those trusts. Therefore, the life cover continues to be an affordable way of leaving something behind as it costs a small amount every month, with a predetermined guaranteed value. Both Cindy and Virath agree that given the current strain on many people finances, building up a large investment is not an option many have. And, insurance therefore continues to offer a safe way of ensuring that your family is not left destitute. Since this is the case, I’m glad that we’re a little wiser on what to look out for.

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