Do I Have Enough Life Cover?

You love your family and you want them to be okay if something happens to you. But how much life cover is enough? Many people pick a round number, or rely on a funeral policy that would barely cover the funeral. There is a clearer way to work it out.

What is happening

Life cover should replace what your family would lose if you died, not make them rich. A needs-based approach adds up four things.

1. Debts to settle: the bond, car finance, loans and credit cards, so your family is not left carrying them.
2. Final and estate costs: the funeral, executor's fees and other estate costs, which can be a significant amount.
3. Income replacement: what your family needs each month, multiplied by the number of years until your youngest child is independent or your partner could cope alone.
4. Future goals: school and tertiary education for your children.

Then subtract what already exists: group life cover through work, other policies, savings and investments. The difference is your cover gap.

Rules of thumb like 'ten times your salary' are a starting point only. A single person with no dependants may need very little life cover, but good disability cover matters more for them. A parent with young children and a bond may need much more than they think.

Name beneficiaries on your policies and keep them up to date. Policy money paid to a named beneficiary usually reaches them faster than money that goes through your estate. If children are young, speak to someone about a trust or guardian so the money is managed well for them.

Signs to notice

• People rely on your income for food, rent or school fees.
• You have a bond or other large debts.
• Your only cover is a funeral policy.
• You have not checked your beneficiaries in years.
• You recently had a baby, married, divorced or bought a home.

30-second self-check

Answer yes or no.

• Do children, a partner or family members rely on your income?
• Do you have a bond, car loan or other large debt?
• Is your total life cover less than five times your yearly income?
• Is your only cover through your employer, which you would lose if you left?
• Have your beneficiaries not been updated since a major life change?
• Would your family struggle to pay for your funeral within a week?

0-1 yes: Your cover may be close to right. Check your beneficiaries and review again after any big life change.
2-3 yes: You may have a gap. Use the calculator to put a number on it.
4 or more yes: Your family may be underprotected. Work out your gap and speak to an FSCA-authorised adviser about affordable cover.

What you can do next

• Today: Ask HR how much group life cover you have and who your nominated beneficiaries are.
• This week: Use the calculator to add up debts, family needs and education, and subtract your existing cover and savings.
• This month: Get quotes from at least two insurers through an FSCA-authorised adviser. Consider disability cover at the same time.
• Make or update your will so it works together with your policies.

Your tool

Life Cover Calculator - enter your debts, family's monthly needs, years of support and existing cover to see an estimate of how much life cover you need and your current gap.

When to get professional help

Speak to an FSCA-authorised adviser before buying or replacing policies, and to an estates attorney or fiduciary practitioner if you have young children or a complex family. Thinking about your own death is hard. If it brings up anxiety or grief, it helps to talk.
Who can help: FSCA-authorised insurance adviser, FSCA-authorised financial planner, estates attorney

Getting help in South Africa

The Financial Sector Conduct Authority (fsca.co.za) lets you check that an adviser or insurer is authorised. The FAIS Ombud (faisombud.co.za) handles complaints about advice. The National Financial Ombud Scheme handles complaints about insurers. Your Cleared Mind EAP can connect you with support to plan and talk through these decisions.