About Life Insurance.

Choosing the right life insurance.

We provide comprehensive pure-risk life and disability insurance products. Comprehensive means that you are covered should you die or become disabled, whether this is due to health or accident related causes, as set out in our policy documents. Pure-risk means that our products do not include a savings element, and do not offer a surrender value at the end of the term or upon termination of the policy.

We do not provide investment, savings, or medical insurance products.

Three broad categories of life and disability insurance are offered by AllLife:

Whole Life Insurance

Whole Life insurance products provide cover indefinitely (for the whole term of your life), or until such time as you elect to cancel the policy or stop paying your monthly premiums. Whole Life insurance products may provide you with additional peace of mind that your life insurance cover will always be there, whenever you may need it. A whole life insurance policy pays out a defined value in the event of the insured’s death for as long as the policy is paid up.

AllLife provides both level-premium and escalating-premium whole life insurance options. The escalating premium makes the policy cheaper at inception, but with premiums increasing at 5% per year. Level-premium policies maintain a constant premium for the life of the policy.

Is whole life insurance cover right for you?

Life insurance is a very important part of personal financial planning because it is a rapidly available source of cash for a person’s dependants upon the insured’s death. Within a few months, the insurance company will make a lump sum payment to the designated beneficiaries. This provides the money needed to settle debts, and to pay dependents’ living and education expenses for a significant period of time.

Taking a whole life policy makes sense for someone who wishes to obtain insurance at a relatively young age—to benefit from the somewhat lower premiums available to younger people—and who anticipates that they will need life insurance for more than twenty years.

As an illustration, suppose Richard has recently turned 25, he is married and has started fulltime work. He plans on starting a family in the next 3–5 years and wants to provide for their needs. He has just recently been diagnosed as HIV+, and wants to apply for life insurance as soon as possible. He chooses a Whole Life insurance product to secure cover for as long as he may need it, and elects an escalating premium option to allow him to take the most cover he can afford now, while benefiting from future salary increments as his career progresses.

Loan Protection Insurance

Loan protection policies provide a benefit amount that declines over time. This is structured so that, in the event of death or disability of the life insured, that this insurance policy benefit should be equal to the (declining) outstanding balance on a loan of the same term as the policy.

AllLife provides a set of loan protector policies designed to match the outstanding balance on an amortising loan. The cover provided will settle a loan that has been paid in accordance with the schedule set by the lender, without allowance for re-advances.

The term of the loan protector policy must match the term of the loan to be effective in covering the outstanding loan.

Note that you must match the term of the policy to the term of the loan. A 10-year loan protector product will not cover the outstanding balance on a 20-year loan, even during the policy’s 10-year term.

Policy Sessions

Any of our policies can be ceded to a bank or another lender as security against a loan (if required). Lenders may require life insurance to secure a home or business loan, or to guarantee that these assets will not need to be repossessed in the event of your death.

This ensures that if you die (or perhaps are permanently disabled), the loan will be settled and your family will retain ownership of the house (or business) asset that you had bought.

Please contact us for a policy cession form if you need to cede an AllLife policy and we will assist you.

Age rated premiums

AllLife does not offer age rated policies as we feel that the annual premium escalation on these policies places unreasonable pressure on our clients’ affordability. Premium escalation on age rated policies can be in the order of 7.5% per annum, implying that premiums on such policies will double every 10 years.

Term Insurance

Term insurance products provide cover for a defined period of time. Under a term insurance policy you are covered from the policy inception date until the end of the term period. At the end of this period, the policy terminates. Should you still require life insurance, you will need to reapply for cover. Term insurance may provide cover during a period of your life when you really need it, for example while you are supporting young children, or while you have significant personal debt.

A term life insurance policy pays out a defined value should the insured die during the term specified. For example: a R500 000 level cover term life policy with a ten-year term taken out today will pay the insured’s beneficiaries R500 000 if the insured dies within the next ten years.

The simplest form of a term life policy requires the insured to make equal premium payments throughout the term. This is known as a level-premium policy (AllLife’s term policies are all level-premium policies).

Level-cover term policies provide a fixed amount of cover throughout the term of the policy. AllLife’s 10-year and 20-year level cover policies are examples of this type of policy.

Is term insurance cover right for you?

Young to middle-aged people generally use term life policies to make provision for liabilities that will not last forever. Term life coverage is often purchased to ensure funds are available for a child’s education, to provide income for a surviving spouse, or to pay off a home loan.

For example, Agnes (who is HIV+) decides on her 41st birthday that she wanted to take out life insurance to provide for her teenage daughters’ financial well being, in the event of her death. Given that her daughters are teenagers, she assumes that they will have completed their schooling and any tertiary education within the next 8–10 years, and be financially self-sufficient. A 10-year term policy will provide her with peace of mind for the next ten years. Because her risk of death during the ten-year period is significantly lower than in the next twenty or thirty years, the 10-year term policy offers her the most affordable cover available. Given that she believes her daughters will be independent at the end of the ten year period, she knows she is only paying for cover while she (and her daughters) really need it.

Life insurance demystified

Put simply, life insurance allows an individual to pay a monthly amount (called a premium) to a company in return for their promise to pay out a relatively large amount of money in the event of the insured person’s death (or permanent disability in the case of disability insurance).

The premium is based on the size of the benefit provided. This is based on (amongst other things) the likelihood of a claim occurring during the life of the policy.

Insurance provides for the losses of “the few,” paid for from the premiums of “the many.” This is a risk transfer agreement, whereby the responsibility for providing for dependents (eg. earning an income for one’s family in the event of death), passes from one party (the life insured) to another (the insurer) on payment of a premium.

The insurance industry has therefore evolved as a response to a person’s need to manage risk in their lives, particularly to help people plan for the unexpected.

Insurance companies will usually limit the amount of cover available based on the life insured’s income—the life cover is meant to make up for some of the income that the deceased person would have earned over some period of time. It usually cannot exceed the income that an individual would have expected to earn over a number of years.

Assessing your insurance needs

When buying life insurance there are some basic things you should consider:

  • Before purchasing a life insurance policy, consider your financial situation and the standard of living you want to maintain for your dependents. For example, who will be responsible for funeral costs and final medical bills in the event of your death? Will there be adequate funds for home loan payments, education and other living expenses?
  • You should ideally re-evaluate your life insurance needs whenever you experience a major life event such as marriage, divorce, the birth or adoption of a child, or purchase a major asset such as a house or business.
  • If you are not sure of your needs, you should discuss them with a trusted advisor such as your bank manager or insurance broker.

Useful Contacts

The Life Offices’ Association of South Africa

021 421 2586
info@loa.co.za
www.loa.co.za
P.O Box 5023
Cape Town
8000

The Financial Services Board

080 020 2087
info@fsb.co.za
www.fsb.co.za
P.O Box 35655
Menlo Park
0102

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