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Risk cover is necessary to protect the livelihoods of yourself and your family in times of crises.
When building a resilient financial portfolio, we tend to mainly think about the investment component – yet building wealth depends on one crucial component – your ability to earn an income and protecting that is essential.
Have you protected yourself and your family should something go wrong?
Unfortunately, I often see the effects of a partner passing away, leaving a family behind with nothing, or even worse: indebted. This leaves loved ones and dependants in crisis. Ensuring that you have the appropriate risk cover in place is one of the most important steps when building your portfolio. Not only are you protecting yourself, but also your family should something happen, and you are not able to work anymore.
- Life cover – this will firstly ensure your family won’t be left with debt. It ensures that no financial strain is placed on the household should you pass away. Life cover can also address the maintenance needs of your family, ensuring their financial freedom in the event of your death and that they remain in the same financial position as before. This is imperative if your spouse is the breadwinner of the family. Life cover is also often used to ensure liquidity in your estate so that your estate can be passed to heirs without unintended consequences.
- Income protection – this is a crucial element of your risk portfolio, as you are protecting your own ability to earn an income. Should illness or disability (even on a temporary basis) strike that renders you unable to work, your income will be replaced. Should it be more serious, and permanent, your income will be replaced until retirement stage.
- Severe illness cover – this benefit takes the form of a lumpsum payment that covers you in the event of a severe illness. This will be paid as a lumpsum payment (it works together with the monthly income protection benefit mentioned above). Depending on the insurer, the benefit may pay out different percentages based on the severity of the illness. For example, you will only receive 25% of the insured amount for a less severe illness. The funds can assist with any unforeseen expenses, or if lifestyle changes are required due to a severe illness.
- Lumpsum disability benefit – this benefit also complements your monthly income protection. The lump sum benefit will be paid if you become disabled. The lumpsum capital can be used to cover unforeseen lifestyle expenses due to disability, for example a wheelchair friendly home, or a different home entirely.
- Global education benefit – by including this cover you will also have the benefit of protecting your children, should something happen to you including death, disability or illness. This benefit will ensure school fees are paid, as well as one tertiary degree, and depending on the provider, fees may even be covered should your child want to study abroad.
We can follow a very comprehensive approach to structuring risk, but ensuring you have the essentials in place is the first step. This also ties in with having a medical aid, and ensuring you have an updated will in place.
If there is one thing we all learned in the past two years, it is that life doesn’t always go as planned, and we need to ensure we are also making provision for the unforeseen events in life.
Elke Brink is a wealth advisor at PSG Wealth.
