Unravelling the Complexities of Life Insurance
July 26, 2022

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Understanding Life Insurance

Nobody likes to think about death, least of all their own. But preparing for it can at least help ease the path for those loved ones who would be impacted by such a devastating loss. Life Insurance helps to do that.

But Life Insurance encompasses much more than just a financial payout following a death. It also helps to provide an income under circumstances that prevent you from earning any yourself because of an illness or a disability

There is more to Life Insurance than you know, but once you start researching it, you’ll soon realize there is a lot of information out there – and that much of it can be very confusing. To help clarify some details, we at Wealth Smart have created this guide to assist you through the complex layers of Life Insurance cover.

Making the right choice with Life Insurance is crucial to getting the right protection for your loved ones when you’re no longer able to provide an income.  Since every person is unique and leads a different life, Life Insurance should be tailored to your individual needs.

Determining the best Life Insurance cover for you is about getting the balance right between needs and affordability. To achieve this balance, we’ve detailed six questions you need to consider regarding Life Insurance:

6 Questions to get the right Life Insurance for you

Life Insurance can make a difference in your life.

Life Insurance can make a difference in your life.

1.  Who will benefit from Life Insurance cover?

To determine who will benefit from your Life Insurance cover, you need to ask yourself who will be affected when your income is gone. This will almost always be you and your closest loved ones – your life partner and children. But there are others who could rely on your income, including business partners and aging parents.

Once you know exactly who would benefit from Life Insurance cover, you can start assessing their current and more importantly their future needs to determine the amount of cover needed for them to live comfortably.

 2. What are your basic monthly expenses?

Determining what your monthly expenses are today shows you how much you may need in the future to live comfortably. This helps guide the amount of cover you and your beneficiaries might need.

3. How far will your savings go?

Your own finances, including current savings and other sources of income, should be considered when determining what Life Insurance cover level you may need. Savings could potentially eliminate the need for certain benefits and therefore lower your premium. Keep in mind that savings shouldn’t replace a Life Insurance policy.

4. What liabilities need to be taken care of?

Most Life Insurance covers include a lump sum payment that helps to pay off outstanding debts. Calculate the big expenses worth paying off immediately should you lose your income to help determine your level of cover.

 5. What types of Life Insurance would you like?

There are four different types of Life Insurance, including:

  • Life Cover
  • Total Permanent Disability
  • Trauma Cover
  • Income Protection.

Each cover differs according to the type of cover (whether a lump sum or an income) and the circumstance that would require the cover. It is worth assessing your risks to decide what you would like to include in your Life Insurance policy.

 6. What personal circumstances may affect your Life Insurance?

Your own personal circumstances can affect the premium you pay annually for your Life Insurance.  Factors such as age, gender, pre-existing medical conditions, smoker status, occupation and lifestyle help to calculate your premium level.

Free eBook: A Colossal Journey – 6 questions to determine how much life insurance you need

Life Insurance is an important business and getting it right for you is crucial. Once you have correctly assessed your current and future needs, you can go about picking a cover that balances those needs with what you’re willing to pay for that security.

Our eBook Life Insurance: A Colossal Journey explores in greater depth the six questions outlined above to give you a better idea of the things you need to consider before choosing your Life Insurance policy.

At Wealth Smart, we understand that your journey through the many layers of Life Insurance can be stressful, so we’ve broken it down into easily digestible pieces. After you’ve read our guide, you should have a greater idea of what to expect when you decide to make the next step to securing your Life Insurance policy.


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