Having life insurance on one’s life will ensure a lump sum or monthly income paid out in the event of death, disability or diagnosis of a Dread Disease, also known as critical illness or severe illness. Disability and Dread Disease are often added ad a rider on the life cover and if a payment was made for one of those events, the life cover is usually reduced by the amount of disability or Dread Disease that was paid. This option is always the least expensive way of buying life insurance. We believe that the benefits, disability and Dread Disease should be a standalone part of the policy as it will not affect our client’s life cover in the event of a claim.
It is an event that drastically changes a person’s life, most common are heart attack, cancer, stroke and coronary bypass, but not limited to those events.
Some standalone Dread Disease products offers the option that cover will be reinstated after a claim. Some products offer multiple claims for the same event plus reinstatement of Dread Disease cover, the cheaper options pay in percentages depending on the severity of the event. Some offer additional types of illness and those that are yet to be discovered.
Most commonly these products pay when a person is unable to do his own or similar occupation. It is our belief that the own or similar occupation categories will not always pay as the policy owner may be able to do another type of occupation. Other forms of disability are physical impairment, which will pay a predetermined sum should the policy holder lose the use of a limb, eye etc. Functional impairment will pay a lump sum should the policyholder lose the functionality of a body part and it affects their activities of daily living like feeding, washing, moving etc. There are also combinations of the above in one product. The most under sold but effective product for disability is income protection, which will pay out the policy holder’s salary or commissions earned when unable to work for a short period or for the rest of their life. It has various waiting periods of 4,7,14,30,60 and 90 days and starts paying after the waiting period is over. We believe that this type of product offers a lot more security for the policyholder in a disability event. Imagine you earn R20 000 per month and have a lump sum of R1m, how long will it last if you are permanently disabled. Compare that with an income of R20 000 per month which increases annually for the rest of your life….
Group life cover is a scheme provided by an insurer to employers which will cover their employees at a predetermined multiple of annual salary in the event of death, disability or critical illness. The employees’ monthly salary can also be insured in the event of a temporary or permanent disability.
Living Annuities provide an income to pensioners of 2,5% to 17.5% per annum of the capital amount invested, and can be taken in combination with a Guaranteed Annuity
A Guaranteed Annuity will provide the investor with an income for life but at reduced levels, depending on how the Insurer foresees the future of interest rates. Problems can arise with this type of Annuity in that the income cannot be controlled and can result in a lower level of income compared to the Living Annuity which allows up to 17.5% drawdown. Of course, the Annuitant needs to invest wisely, should he/she decide to draw down 17.5%, as the investment will have to grow at more than 17.5% per annum in order to maintain the Capital. The Annuitant’s capital in a Guaranteed Annuity will cease on his/her death or on the death of the last living spouse, and expiry of the guarantee, where as in the case of a Living Annuity, the investment is distributed to the Annuitant’s beneficiaries.
This is an Employer assisted savings plan for retirement directed at Employees. The Employer and the Employee each contributes a percentage of the Employee’s salary toward the fund. A Pension Fund’s contributions are tax deductible from the Employee’s salary, whereas the Provident Fund’s contributions are not. When retiring, the Employee has to invest two thirds of the Pension Fund lump sum into a Compulsory Annuity, with one third being payable in cash less tax, whereas the Employee retiring from a Provident Fund may invest as he wishes. Both funds’ lump sums are taxable on retirement.