Life cover for parents
There is no question of the importance of your parents hence, sound life cover for parents is one of the best things you can get for them. There are many life cover products available in South Africa, but not all life insurance policies are equal, which is why we have compiled a list of things to look out for to separate the chuff from the wheat.
Life cover for my parents
Understand your needs
Just as not all life cover isn't equal, your own needs are not necessarily the same as those of the next life insurance buyer. Because of this, you need to know exactly what you want out of the policy that you buy.
You should ask yourself how much cover is reasonable enough for yourself and your parents. Remember that insurance salespeople aim to sell you the most amount of cover, even if you do not need the excessive cover. Typically, you can buy life cover in South Africa to the tune of R20-million.
Consider what your parents already pay for
If your parents pay for your younger siblings' tuition, as this forum member mentioned on http://mybroadband.co.za/vb/showthread.php/470918-Life-insurance-policy-for-parents for example, the insurance you take up for your parents can help pay for your younger siblings' school fees when they pass away.
If their bond is still outstanding, and you happen to live in that home and are poised to inherit it with your siblings, then it's wise to get your parents life cover. The payout upon their death or at any time they are unable to furnish the rest of the mortgage means the insurer would cover it.
There are many other examples of situations where the disability or passing of your parents can have a material effect on your own finances. You must have an insurable interest in the occurrence of any of those material effects in order to fully benefit from the cover.
Understand the difference between term and whole life insurance
Some life cover policies have only a protection component, while others include an investment component. These are called term life cover and whole life cover respectively. What this implies is that if you take up cover for your parents, and then later decide that you do not want to continue with the policy, it will automatically lapse without any money paid to you in a term policy, whereas you will receive a surrender value (determined by the insurer) in a whole policy. The surrender value is the investment portion of your cover less any penalty fess and other fees.
Recognise that life cover and funeral cover are different
Life cover offers a broader range of products than just a death component. This means that you can be covered for disability, chronic and terminal illnesses, unemployment, and there is the savings component (with respect to whole life cover). Funeral insurance on the other hand covers you solely for the purposes of death of you or your parents and parents in-law in your policy, where the costs of burials will be accommodated with the cover amount. Life cover is more costly than funeral insurance for your own self, but the difference between the two when you add your parents on your policy is (on average) not that excessive.