Tips from a financial adviser to keep your life cover in check

Whether it's the end of a year or the beginning of a new one, it's time for reflection. But what does that mean in the context of life insurance?

By definition, 'reflection' refers to a serious thought or consideration of an idea or purpose. Life insurance policies are laden with detail - detail that's been well considered since inception, and for very particular purposes.

In another sense, life cover functions as a reflection of your life goals, and thus requires periodic consideration for those goals or purposes to be correctly and sufficiently met.

In other words, whether at the top or tail end of a year, reviewing your life insurance is a critical part of having a goal in the first place. Keeping all those details in check regularly will see to it that it does what you need it to, when you need it. Simply put, what you put into it is what you're going to get out of it.

We chatted to Discovery certified financial adviser, Claire van Wyk about how to go about keeping your life cover in check as we round up 2021 and head into 2022.

What's the best way to go about planning for premium payments before and after the holidays to avoid getting yourself into unnecessary debt?

It's always such an incredible time because many get wrapped up with all the excitement of year end, staff parties, holiday festivities, going on summer holidays or taking some leave.

Often the important things like 'Have I considered that I might be paid early?' get forgotten about. If you're one of those individuals, you almost end up having two salaries in one month. So, you will have your November salary paid at month end and your December salary paid early; and what ends up happening is that people tend to overspend.

So often, overspending happens in December and when January comes around, we don't have money to pay for our important covers - like medical aid, car insurance and life cover. So, what I always advise people to do is make sure they put aside exactly what they need to cover all their debit orders. When you get paid at the end of November, pay your December debit orders immediately. When you get paid early in December, what you should do is either ask your provider (like Discovery) to debit early or make sure you put the money 'out of sight, out of mind' until such time as your debit orders are going to run for January.

What advice can you offer that would be helpful in planning for 2022?

You need to go through the six-step financial planning process with a financial adviser. If you're going to be doing this in January or February, we know that money tends to be tight. So, you need to have a considered plan that fits in with your budget.

Part of that assessment looks at evaluating your financial status, matching your goals and needs with available options, comparing different plans and premium structures available to you - all while keeping your income and budget in mind.

Sit down with an adviser; go through an assessment and formalise a plan to come up with the correct and accurate amount of cover for yourself - and make sure it fits into your budget for the forthcoming year.

If 2020 and 2021 are anything to go by, 2022 should be quite an interesting year. It really boils down to how've we managed our finances though the crisis. Many people lost a lot. A lot of people are still trying to catch up. So, a top tip from me would be 'Have you sat down with a financial adviser?' - 'Have you reconsidered your whole budget?' - 'Have you re-evaluated what your needs are?' - 'Are your policies still serving your needs?'

With this recent period in mind, a big thing for me is severe illness and comprehensive disability cover. The impact of COVID-19 is still being felt far and wide in our client base. One of the things you need to look at is making sure your life cover benefits are going to cover what you expect them to in terms of COVID-19 and all the other known health conditions linked to it.

So sit down, do your planning, and make sure your budget is accurate - I cannot stress this enough. If you need to, please find a professional who can show you how to budget. You almost need to manage your personal finances like you own a business. The most important things need to be accurately considered in your budget, and one of them is certainly life cover.

What needs special attention during a policy review? Should this also include an estate plan audit?

During this recent period, what stood out glaringly for me as a professional is that we're not prepared to die. While we naturally don't really want to die, we are, as a country, generally not prepared should death happen. For me, at a policy review, the biggest things to check with a client (and it doesn't matter who you are or how much you have) are 'Do you have a will in place?' and 'Do your life cover, estate planning and your will all talk to each other?'

This is something that needs to be focused on right now - and very much so if you have children. We couldn't have anticipated that it now takes at least 6 months to register executors. This is just one of the new challenges.

When I look at overall, holistic planning, I've started bringing in more practical planning considerations. For instance, should there be a total loss of a mom and dad; if we've left everything to a testamentary trust and an executor needs to be set up, you might have a case where families (and children) don't have access to money for a period of time. Money might be intended for guardians, but it may not be accessible in the short term. As a result, I've strongly started suggesting that as a part of the financial plan, we leave an amount of money to the guardians while a testamentary trust is being set up and an estate plan is being initiated. Guardians will need this well before a trust or estate plan can even be finalised - especially if there are delays, as we've seen in recent times.

For me, this is something I think we need to hone in on as financial planners. We need to start protecting our clients and their families at a higher level. We need to start thinking about all this as personal and not just professional. We need to take it to a new level, thinking about planning solutions as if it was concerning our own kids. I strongly believe that that's what we, as planners, need to start paying very special attention to.