Life Insurance is one of the most popular and best ways in which people in South Africa plan for their financial future. In terms of a life insurance policy, the person being insured is required to pay a premium for a specific period of time or for his entire lifetime and in return, the insurance company undertakes to pay a certain amount of money in accordance with the conditions set out in the policy document. There are four individuals who are party to a life insurance policy, each required to fulfill their obligations in terms of the agreement. The person who buys the policy is the policy holder, the life insurance company is the insurer, the person whose life is covered by the insurance policy is the life assured and the person who ultimately receives the compensation from the insurance company is the beneficiary.
The main purpose of life insurance policies is to ensure that surviving family members are financially secure after the death of the bread winner. All South Africa residents are eligible to obtain life cover by simply selecting any one of the leading insurance companies in South Africa and viewing their product range. There are different types of life insurance cover and your choice of cover will be largely dependent upon your risk profile. Whole life insurance is a permanent type of life insurance which combines life cover with a money-market type of investment fund. This type of cover pays a fixed amount of money upon the death of life insured. In addition, a portion of the premium payment contributes towards building a cash value and you can borrow against the cash accumulation tax-free. Some whole-life policies can be used to reduce future premiums or to purchase additional life insurance.
The other type of life insurance cover is term insurance which unlike the whole life insurance policy does not offer an investment component. Term Insurance offers life coverage for a specific period of time and must be renewed usually on an annual basis. It is common knowledge that young policy holders enjoy very low premiums for term insurance and the premiums steadily increase as you get older. Most life insurance companies in South Africa provide Universal Life Insurance, a flexible premium life insurance policy which can be tailored to meet your individual needs. Policy holders are given the opportunity to vary their premium payments in accordance with fluctuations in income.