From philosopher, Søren Kierkegaard, who identified three life stages, and philosopher and mystic, Rudolf Steiner, who based human development on seven-year cycles, to ancient Chinese wisdom and psychologist, Sigmund Freud’s psychosexual stages of life, many have tried to pinpoint the various phases of human evolution.
Life insurers, however, take a much more pragmatic approach to identifying life stages. Understanding what life stage their clients are in, helps them offer solutions that provide the optimal cover for them at any given time.
Mareli Mans from Metropolitan Retail eexplains, “A young professional, who is starting out in life, will have significantly different needs to a high net worth individual with several dependents to take care of. As you progress through life, your circumstances and insurance needs change, which is why you need to review your life insurance portfolios regularly”.
From an insurance perspective, life stages can be grouped into the following categories:
Starting your first job
Buying your first car or home
Getting married
Having children
Getting promoted or breaking through a pay ceiling
Pursuing adult education or providing good education for one’s children
Starting a business
Saving more money
Retirement
Man’s says, “Notably, having children is one of the few events that change your sense of responsibility. It compels you to think about what needs to be done to secure your -and your loved ones’ future”.
She advises that we should review our policies annually to ensure that they still meet our needs. “If not annually, you should review your portfolio – at the very least – every time you enter a new life stage”.
Reviewing life policies allows you to make sure you are still covered for what you intended to be covered for and to adapt or enhance your portfolios if your circumstances have changed.
What cover should young professionals consider getting?
While everyone’s circumstances differ, as a young professional you need to consider what types of insurance will ensure your financial future is secured. Getting advice from an authorised financial planner will make sure that you cover all your bases.
Amongst the other policies to think about when starting out in life, the following are important considerations:
A funeral policy
Income protection, to ensure that you continue to receive an income if you become disabled
Car insurance, as your car is probably the most expensive item that you own
A life and disability policy to cover any debts such as a student loan or new vehicle or other commitments such as a spouse, parent or relative.
How should life insurance be adapted in the event of marriage?
When you are married, you want to ensure your spouse will be comfortably taken care of and not be burdened with debt in the event of your death, and vice versa. This may mean committing to an additional policy to cover extra commitments, adding your spouse to your funeral policy, or taking out a separate life policy for your spouse.
You need to compare the cost of adding your spouse to your existing policy (if possible), replacing your existing policy with a new combined policy or buying a new separate policy for your spouse. The latter may be more cost effective than getting a combined policy, as premiums are based on age, occupation and health history.
Keep in mind that whether you are married in or out of community of property impacts your policies. If you did not sign an Ante nuptial contract before your marriage, then by default you will be married in community of property in terms of South African Law. This means that all your assets and debts are shared.
Should a married couple decide to divorce, it is important to consider the implications of cancelling your policies or reducing cover. Importantly, you must remember to change the beneficiaries on your policies if you are divorced.
What needs to change when the family expands?
As with a spouse, when children arrive, you need to adapt your insurance policies to ensure your dependents are not left to deal with debt or unpaid medical bills. It is also important to ensure that your children’s education, clothing, accommodation and food bills are covered until they are able to provide for themselves.
Does your life insurance need to change when you buy a house?
If the amount of cover that you have in place is enough to pay off the home loan and leave some additional money for unexpected events it may not be necessary to change your life insurance. If the cover amount does not cover this, you will have to review your policy.
Importantly, most home loan providers will offer life cover and some may even require this cover in order to grant the loan.
If you already have life policies in place that are sufficient to meet the debt (and any additional needs) you can offer this to the home loan provider as security. They will check the policy details to make sure that it meets their requirements.
If you don’t have any cover in place, you can consider various options provided in the market, including that offered by the home loan provider. Feel free to shop around, or ask a financial adviser to help ensure that you have the right cover in place to secure your new home.”
How does retirement affect insurance portfolios?
Man’s clarifies that when planning for retirement, you need to review your insurance portfolios to see if you are adequately covered to meet your commitments after you retire. It may not be advisable for you to cancel your policies as you may not get the full benefit if surrendered.
Adding to that, says Mans, “Life cover premiums vary drastically by age and health status – with young, healthy lives paying the lowest premiums. Life cover gets more expensive as you get older. Your health may also deteriorate with age, which could lead to hefty premium loadings, exclusions or even being declined cover due to health fears. Therefore, your insurance policies should be in place long before retirement age to secure affordable premiums and avoiding adverse health events impacting your ability to get covered.
“You may enjoy life cover as part of your benefits on you pension plan. If so, it is important to consider whether you will still need this cover after retirement. Most pension plans offer a conversion option whereby you can continue with the same cover you had under the pension plan without the need for medical underwriting.
“Once again, it is always best to speak to an authorised financial planner who has the expertise and tools to analyse any gaps between your assets and liabilities and can help you make informed decisions, as well as offer personalised solutions. The days of one-size-fits-all are long gone,” concludes Mans.
Life insurance may not be top of mind, but it is important to consider all options as you progress through life. You will enjoy greater peace of mind in the knowledge that you have taken positive steps to protect yourself and your loved ones from life’s hard knocks.
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