Types Of Life Insurance In South Africa

Nobody likes to think about dying. But at some point in your life, you’ll need to start preparing for the future and the inevitability of death. And if you have dependents, life insurance is an important investment that you need to put some thought into. 

Like most insurance policies, it doesn’t necessarily come cheap. But the price of the premium you pay is often worth the peace of mind that comes with knowing that your loved ones are cared for should you pass away.

Everyone is looking for the best life insurance in South Africa at the most affordable price. But the broad diversity in any individual’s personal needs, family dynamics, and financial situations make it impossible to have just one type of life insurance available.  

In this article, we’ll explore the main types of life cover, as well as factors to consider when choosing between life policies, including financial costs.

What Is Life Insurance?

Life insurance is a policy taken out by an individual with an insurance company that promises to pay out a designated sum of money in exchange for a premium. 

In other words, it’s a financial safety measure that pays out the amount to the individual’s dependents. This will help them to cover the costs of, for example, a mortgage or personal loan. 

A small stack of money notes beneath a pile of coins

This amount is paid out to the individual or their dependents in the event of severe illness, disability, loss of income, or death. As mentioned previously, the details of each policy may differ from one person or company to another. We’ll get into that in a little more detail.

Think you already know what you’re looking for? This may be a good time to get a life insurance quote. If not, keep reading to get a better understanding of what’s on offer.

Types of Life Insurance Policies

There are two main types of life insurance policies – short-term and long-term. Each offers different levels of coverage with different premium costs and, subsequently, different benefits. 

These days, you can even find insurance for your pet. But that’s a type of insurance that can be discussed another time. 

Both life insurance types can be really great choices depending on what your financial situation is or what you intend on gaining from your policy of choice. However, it’s important that you know what exactly each option entails before making your choice.

Term Life Insurance

Short term policies are also known as ‘term life insurance’. As the name suggests, individuals who choose this type of cover receive cover at a fixed rate for a certain period of time, such as five or ten years.

If the policyholder happens to pass away during this time, their dependents or beneficiaries receive payment in the form of a lump sum

Examples of short-term insurance include the cover of your assets, such as your vehicle, property, or jewelry, against theft or accidents. 

A burnt-down house destroyed by fire

This type of cover is the most basic and poses little to no difficulties if the policyholder decides to cancel it. It offers a decent death benefit cover, but without a high premium, as opposed to its long-term counterpart. 

However, it’s not a permanent life insurance plan. The policyholder can choose to have a fixed term of, for example, five years. With the option of renewing the policy once that period expires. The premium rate will either stay the same or it may change if you experience any major life change. 

Term life insurance is therefore a more affordable option for those with a lower income who can’t afford full cover but would still like to take out a life policy. 

Whole Life Insurance

Long-term insurance is also known as ‘whole life insurance’. Unlike its short-term counterpart, this option does not expire and instead offers lifelong coverage for the policyholder. It also offers the option to add an investment component.

The investment component essentially means that the policyholder will still receive a payout if they were to decide to cancel the policy. In the case of the policyholder’s death, the beneficiaries will receive the amount. 

Examples of long-term insurance include income cover, disability cover and critical illness cover. 

With this type of insurance, the policyholder will pay premiums at a fixed rate for the rest of their life. However, as mentioned previously, it also gives them the option to withdraw and receive a payout. 

The policy can be paid out in full when the policyholder passes away, or if they become severely ill or disabled.

Factors to Consider When Getting Life Insurance in South Africa

You may be looking for the best value or the cheapest life insurance in South Africa. Either way, it’s good to bear in mind that the costs of each insurance policy will vary from person to person depending on a number of factors.

1. Age

Individuals who are younger and healthier tend to pay less on their premiums in comparison to persons who are older, and subsequently, high-risk. This is because younger persons are less likely to develop any serious illnesses or disabilities, and can generally recover quicker and easier.

2. Health 

If you smoke, are overweight, or have any pre-existing conditions, you can expect to pay a higher premium in comparison to the average person. Some companies may lower the premium and reward healthier lifestyle choices. Which means better premiums for you if you decide to quit smoking.

3. Profession

Persons with high-risk jobs, such as construction workers and firefighters, are likely to be charged a higher premium due to the nature of their work. 

Construction workers in orange uniform at a construction site with large machinery

4. Lifestyle

Persons who partake in high-risk activities, such as extreme sports like professional MMA or skydiving, are likely to pay a higher premium. 

5. Outliving A Life Insurance Policy

With term life insurance, funds may be forfeited if the policyholder outlives the specified period of time without renewing. This is most likely the reason many companies are able to fund generous payouts with long-term or whole life insurance. 

This is a practice that many people are often unaware of, and something that needs to be considered with short-term insurance policies. 

Wrapping Up Best Life Insurance South Africa

If you have family members dependent on you, especially as a breadwinner, it’s crucial to ensure that there is a safety net in place. These funds will help to take care of you or your loved ones should anything happen. 

It’s good to think of a life insurance policy like a measure of protection from risk, especially in your dependents’ favour. There’s no right or wrong time to begin thinking about life cover, and it’s always a good option for those who can afford it. 

Knowing which factors can influence your premium can help to determine what kind of cover you need, and which will offer the best value for money. 


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