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Unconventional Uses of Life Cover

Petrie Marx, 8 August 2018

Life cover is arguably one of the most affordable and most important elements to anyone’s financial plan, but it can also be one of the biggest grudge purchases. After all, none of us want to confront our own mortality.

Many people buy life cover for the first time when they become parents or when they acquire a property. Yet, there are several not-so-obvious uses of life cover. In some instances, life cover can actually provide financial security for you while you are still alive.

1. To secure your property

Many people first acknowledge the need for life cover when they buy a property. While some financing institutions don’t require you to have life cover to get a mortgage bond, it will still be to your benefit to take out life cover.

Whether you have children or not, it is likely that you will prefer your surviving family members to inherit your property instead of it being repossessed by a bank. At the very least, your loved ones will have an opportunity to sell the property at its market value if they don’t want to keep it.

It is important to consider how you will provide for your outstanding debt at the time of your death, especially debt on any assets you own, such as vehicles and/or business assets. This is where a life policy can be very beneficial. After all, if there is not enough money in your estate to cover your outstanding debt, creditors may attach your debt to your family’s assets and they could face the possibility of losing those assets.

2. To insure your maintenance

If you receive spousal or child maintenance, you should consider taking a life policy on the maintenance payer’s life.

Having a policy in place can ensure continued payment should the person who pays the maintenance die unexpectedly.

3. To wind up your estate

Another area where life cover payment can assist is when you die and your estate incurs estate duties. Your family will need to pay a fee for the executor to wrap up your estate and they may not necessarily have the money. Many South African estates, in fact, have a cash shortfall and executors are often forced to sell some of the assets bequeathed for heirs in order to wind up the estate.

4. To capitalise a trust

The proceeds of a life policy will usually be protected from personal creditors if a trust is nominated as its beneficiary. A trust can also protect the proceeds of a life policy which otherwise might be squandered away by irresponsible heirs.

The benefits to life cover are legion. Though it may seem daunting to establish exactly what you need life cover for, proper guidance through a detailed financial plan with the help of a competent financial adviser can help you quantify how much life cover you need for what purposes.


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