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Everything You Need To Know About Insurance (Because This Stuff Is Kinda Important)

We know, we know… Must we talk about insurance? Really? Listen, life throws some pretty mean curveballs (oh hi COVID-19). So you actually need to understand insurance to make sure you’re covering yourself properly.

Let this be your non-boring breakdown of everything you need to know. You’ll come out with a better idea of what insurance you actually need. And you’ll ace insurance industry jargon at your next post-COVID dinner party – ha!

Our expert today: financial advisor and investment specialist Adele Barnard. She’ll guide us past the boring bits to get to the really useful stuff.

READ MORE: How to Prepare Financially When Your Job Suddenly Doesn’t Feel So Safe Anymore

But first, the difference between long- and short-term insurance…

When life is insured it’s considered long-term insurance; when any other item is insured, it’s short-term insurance.

1/ Life Insurance

Ideally, this should be taken out when you’re young and healthy. Life insurance really becomes important when you’re buying a new home, starting a family (or you acquire financial dependants), beginning a new job, or you just want to settle your debts so your relatives aren’t saddled with them when you die.

If you pass away, says Adele, your family will be able to continue to live their best life.

2/ Funeral Cover/Funeral Insurance

“Funeral cover pays a specified amount of money when you pass away,” says Adele. “Your loved ones will be grieving and you don’t want them to struggle financially during a difficult time.”

3/ Disability Cover

This is a lump-sum tax-free payout if you become disabled and are unable to resume work. “Disability cover provides peace of mind that you will be covered if you were to become injured or disabled, whether temporarily or permanently,” says Adele.

The lump-sum payment can be used to cover medical expenses, home alterations, or just to make life easier living with your disability.

4/ Income Protection

“An income protection policy pays you a monthly income should you be unable to perform your job due to injury or disease.” According to Adele, the amount of cover depends on your personal needs and circumstances. “Income protection in the event of you not being able to work temporarily or permanently will be paid out to you tax-free every month,” she adds.

READ MORE: Did You Know That You Can Actually “Insure” Your Salary?

5/ Severe Illness/Dread Disease Cover

Severe illness cover is a type of insurance benefit that offers a lump-sum, tax-free payment should you be diagnosed with a severe illness, like a stroke, cancer, a heart attack or coronary artery bypass graft surgery. “Cancer remains the leading cause of dread disease claims. Advances in the medical science field mean we are living longer, rather than dying from our diseases – and living with a critical illness can be expensive…” says Adele.

6/ Medical Aid

Medical aid is designed to protect your health – and your pocket. “Your direct medical costs relating to any illness or injury, such as your hospital costs, doctors’ bills and medicines, will be covered with the right medical aid plan,” says Adele.

Note that medical aid does not cover benefits for non-medical costs associated with a severe illness. Rather, medical aid provides peace of mind that you will be covered in the event of an emergency.

7/ Gap Cover

Gap cover insurance provides for the shortfall between what your medical aid pays and the rate charged by medical specialists. (Get this: in some cases, the treatment can exceed the base medical aid rate by an additional five-times. Whoa!) So, basically gap cover ensures you’re not left with enormous medical bills you can’t afford to pay.

8/ Short-term insurance

Short-term insurance ensures your personal belongings are covered – think: house, house contents, vehicles, building, cellphones, laptops, jewellery… “We tend to ensure things we value most – which is why device insurance (i.e. cellphones/laptops/tablets) is one of the most popular types of insurance,” says Adele.

So, you need to weigh up what’s important to you? Your iPhone? Your salary? Start there and pick the insurance types that best suit you.

Disclaimer: The content of the article does not constitute as financial advice and can only be viewed as financial education.

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