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Income or capital needs
All of the above events can trigger both capital and income needs. At death all outstanding debt
must be repaid to the bank and other creditors, and the executor will need capital to settle the
estate. But just as important, the family will continue to have an income need – monthly household
expenses, school fees, rates and taxes will continue as before. Previously this income need was
catered for via lump sum life insurance that is used to buy an income, but nowadays insurers offer
income products that are tailor made for income needs at e.g. death, disability and sickness.
Most normal people hope to live a long and healthy life, earn a decent living until they are too old to
work, and then to retire peacefully…
But no one can be sure of that. Even with the best precautions you can’t prevent death, illness or
injury from happening. And you can’t take out insurance to prevent it from happening either.
The best you can do is to take out insurance that will cover your financial needs should death,
illness or injury befall you during your working life. The long term insurance industry has evolved to
make provision for exactly this – the need to make provision in advance for the most serious
events that could prevent you from taking care of yourself or your family financially.
If we have to summarise the events that life insurance covers it will be grouped as follows:
Life Protection – will my family be taken care of if I die?
Loss of income protection – Will my family and myself be taken care of should I lose my ability
to earn an income?
Lifestyle protection – Will I be able to financially survive a major health event and I do not die
but have to drastically adjust my lifestyle?
These are the questions we need to ask ourselves and our clients when we do financial planning
for a client. There are several different benefits available to make provision for these three pillars of
insurance cover.
Life cover
A benefit that will be paid out in the event of the death of a life insured, usually in the form of a
lump sum. But there are also benefits available that will pay a monthly income to the family if the
client chooses this.
Disability cover
A benefit that will be paid out in the event of the life insured becoming totally and continuously
unable to fulfil his occupational demands due to injury or illness.
In the case of lump sum disability cover, the disability has to be permanent – the insurer has to