I cannot think of a single person who actually gets excited about the fact that they have to take out life insurance, it’s not something anyone really wants to think and it’s not something anyone really enjoys spending money on. But if you have to think about life insurance you at least want it to be as easy, rather than as complicated, as possible. If you take even a cursory glance at adverts and information on life insurance you will probably soon be even more despondent as it is difficult to make sense of all the many options that are available. However, it can be simpler than it seems and it helps to remember that there are two main categories – and a few sub-categories within each – of life insurance : with profit and without profit. Let’s take a look at the latter first.

There are three main types of life insurance that are defined as without profit and the first is term insurance. With term insurance you agree with the insurer to cover your life for a specific number of years. You can opt for level term (fixed payments for the duration of the period you choose) or decreasing term (which is used specifically to cover you for diminishing financial responsibilities such as debts, which you hope to decrease as you get older). Credit life insurance is the next type of without profit life insurance and it is very similar to decreasing term life insurance, the major difference being that it was designed especially to cover against installment type debt. Finally, Whole life insurance is a policy whereby you contract with the insurer to insure your life for a specific amount of money. This amount will be paid out, only at your death, to your beneficiaries, but you can arrange to finish paying your premiums before then and still retain the life cover you have paid for.

If the idea of putting away money every money and gaining nothing at all from it while you are still alive leaves you cold then you will probably be more happy with looking at with profit life insurance. There is currently only one kind of with profit life insurance, namely Universal life. The main difference here is that each monthly premium is paid into an investment account which is linked to your life insurance and, as your investment grows, the amount of your premium decreases without affecting the amount of life cover and benefits you are paying for. In other words if you take out a policy for R 500 000 in life cover, and the system at the beginning of a given month works out that you have R 50 000 in your investment account already, you will only need to buy R 450 000 in life insurance for the month ahead. This means that you pay less as you are only paying a premium on the latter amount – directly from your investment account. At some point it is even possible that the value of your investment and your life cover will meet each other and you will not need to make any more payments at all.

There are of course many optional extras, such as disability cover, that you can attach to these policies, but the basic guidelines above should make all your life insurance decisions a little easier.

For more information about life insurance, please visit our website on http://www.hollardlifeinsurance.co.za