Five unconventional uses of life cover

Last updated on 22nd June, 2021 at 09:58 am

Life cover is arguably one of life’s biggest grudge purchases, but did you know that life cover can provide more than just financial security for your loved ones when you pass on?

Many people buy their first life cover policy when they become parents or when they’ve acquired a property. But there are other not-so-obvious uses of life cover. Some can actually provide financial security while you are still alive.

To secure your property

While some financing institutions do not require you to have a life policy to get a bond, it will still help you if you take out a policy. Whether you have kids or not, in all likelihood you would still want your property to be inherited by your surviving family members, instead of being repossessed by a bank. Having life cover will ensure that your outstanding bond repayments can be made; that way your loved ones can get an opportunity to sell the property at its market value if they don’t want to keep it.

To insure your maintenance

If you receive spousal or child maintenance, you should consider taking a life policy on the life of the maintenance payer. Having a policy in place can ensure continued payment in the event of the maintenance payer’s death. It’s advisable to add rider benefits like disability cover and income protection benefits to the life policy, so that you can continue to receive the financial support even when the person paying the maintenance is unable to work due to disability or illness.

To provide for outstanding debt

If there is not enough money in your estate to cover your outstanding debt, creditors may attach your family’s assets and they might face the possibility of losing these assets. If you had business partners and you didn’t keep your business assets separate from your personal estate, your partners might also be forced to close down the business. Life cover can ensure that your outstanding debt is paid.

To wind up your estate

When you pass on, you may incur estate duties and your family will need to pay a fee for the executor to wind up your estate. Many estates in South Africa have a cash shortfall and executors are often forced to sell some of the assets bequeathed to heirs in order to wind up the estate.

To capitalise a trust

The policy proceeds of a life policy will usually be protected from personal creditors if a trust is nominated as its beneficiary. A trust can protect the proceeds of a life policy that otherwise might be squandered away by irresponsible heirs.