Choosing life and disability cover should not be a shot in the dark

After buying your home, investing in life and disability cover is one of the most important purchases of your life. Given the far reaching consequences of this decision it makes sense to seek professional advice before you buy cover since making the wrong choices could leave you or your dependents in dire straits should you become disabled or die.

“Buying life and disability cover is certainly more complex than buying car insurance” says Mark Lapedus, Head of Retail, Alexander Forbes Life. Yet too often people just settle on an arbitrary figure because, at the time, “one million Rand sounded like a lot of money.”

But if people take the time to consider their family’s current and future financial needs, the length of time that they might be disabled, or the length of time their dependents might have to live without their income - people begin to realise that selecting this kind of cover is actually a very important decision.

Looked at this way price can be a very poor guide in choosing the most suitable income protection benefit since the cheapest scheme may cease before your anticipated retirement age - or may not provide comprehensive coverage on an ’own job’ basis . This means that if your are disabled at 53, for example, and your income protection policy ceases at age 55, the benefits will only be paid out for two years - even if your needs require that you work to 60 or 65. “And if you are able to perform another job, even though it might be less well-paying, you will not be paid out at all” warns Lapedus.

A professional advisor would point out these pitfalls while providing the option of paying slightly more for cover to a retirement age of 65. Also, securing cover on an ‘own occupation only’ basis will guarantee payout – irrespective of whether you can perform a less demanding job.

Lapedus also notes that people often omit information that could materially affect their benefits and hence their family’s lifestyle in the event of mishap. While mostly this is not done maliciously it can have devastating consequences. “A professional advisor can prevent this kind of oversight while guiding people to the kind of decision that suits their individual needs and circumstances” says Lapedus.

A professional advisor also provides the personal touch. Having an advisor with whom you develop a professional relationship and who can advise you as your circumstances change is a lot more effective and user-friendly than trying to deal with a call centre where the onus is on you to know what you need to disclose or when to update or change your cover.

Moreover, buying life cover and disability benefits is not a once-off event. Individual risk benefit coverage should be re-evaluated on a regular basis as both your needs and the type of benefits available in the marketplace change over time.

“Protecting the lifestyle and future prospects of your dependents is something you have worked your entire life to secure. Making sure that this is not all lost in the event of your death or disability is in fact one of the most significant decisions of your life – and certainly too important to be left to guesswork or arbitrary price-based decisions” advises Lapedus.