Life Cover is also
life insurance or life assurance, and is commonly held as
one of those things 'you've just got to have'. What exactly is life
cover and how does it work? Don't let complicated insurance
terms obstruct your understanding: here are the basics to help get
you in the know!
Life cover is an
insurance policy that exists between you (the policy holder) and an
insurance company (the insurer) whereby the policy holder pays a
certain premium every month in exchange for the insurer's commitment
to pay a certain sum of money to a stated beneficiary upon the
policy holder’s death. In other words, this means that a
designated beneficiary, such as your spouse or child, gets paid a
lump sum of money either all at once or in installments if you die.
This gives them the financial support that they need to continue
living their lives without your assistance. Life cover payouts
can pay for schooling and education, rental, or even just pay for
your funeral – it all depends on which type of life cover, and how
much, you choose to take out.
There are many
different types of life cover, such as accidental cover which will
pay out a sum of money if you die in an accident that is covered by
the policy – such as in public transport or during a hijack.
This type of insurance is often cheaper because it only pays out on
As with most types
of insurance, you need to be sure to read the fine print: this kind
of accidental death coverage usually does not cover suicides or
death from an illness. You also get special life cover that
you only pay premiums for a certain number of years, or are
particularly geared towards a certain type of coverage.
When choosing your
preferred type of life cover you should always be careful to ask
does this life cover include, and what does it omit? How does this
will this life cover pay out if I pass away? How does this benefit
must I pay each month? What happens if I miss a payment?
Once you have
answered these three questions then you need to look at the company
that is offering you the life cover – how well known are they? Who
underwrites them? Are they a reliable company that is going to
be around in the next twenty or thirty years to actually pay out the
lump sum to your relatives? It is a great idea to approach at
least five different companies to get a broad idea of the different
life insurance plans and options available to you, and then compare
each plan on the three-questions grid.
Your family is
your life and you don’t want to leave them financially unprepared to
deal with their future if you are suddenly no longer around to take
care of them: make all the provisions you need to ensure their
successful and healthy futures with your life cover policy!