Guiding consumers since 2009

Know your insurance: Do you have term- or whole cover?

By Isabelle Coetzee

In order to protect your loved ones if anything were to happen to you, it may be wise to take out insurance. This could include life cover, credit life cover, or even funeral cover.

But did you know that these insurances are divided into term cover and whole cover? We find out what the difference is, and which option would best suit your needs.

Tip: You can ensure that your loved ones are taken care of. Apply for life cover by clicking here.

What’s the difference between term- and whole cover?

According to Shannon Smit, senior healthcare consultant at Independent Healthcare Consultants, term cover is for a certain term and thereafter the cover ceases.

Examples of term life cover include credit life cover, which will come to an end when your debt is settled, and car insurance, which will end when the use of your vehicle ceases.  

Henno Senekal, product expert of Old Mutual’s Protection Solutions, says that after the cover ceases, the customer has the option to convert the term cover and choose either another term or whole life.

Whole life cover, on the other hand, is for the whole duration of a person's life. This includes life cover and funeral cover, both of which will only kick in when you pass away.

Bani Schmidt, sales and marketing executive at Stangen Life Insurance explains. “Term life cover could be cheaper, since you might not die before the term is up; whereas with a whole of life policy, the policy will pay out provided the premiums have been paid,” says Schmidt.

“People would typically take out a specific life product for a specific risk, such as a bond which has a limited duration. Whole of life might also be used as insurance against a bond but can also be used for wealth creation, or taken out until the end of your working career, to ensure your family is taken care of and can maintain their standard of living should you die before you would have stopped working,” he explains.

Which kind of cover should you take out?

According to Felix Kagura, head of life insurance propositions at Standard Bank Group, there are a number of factors to consider when choosing cover.

  • The main consideration is the nature of the need you’re covering. If you’re taking cover for a temporary need, term life may be the better option. A good example is taking out life insurance to cover personal debt on a car. However, if the life insurance is taken out to cover a need that does not expire, then whole of life cover is important. A good example of this when you’re covering the costs of winding up an estate.
  • It’s important to consider the fact that life insurance premiums tend to increase with age. Deteriorating health can also increase premiums, and can make it more difficult to procure life cover in the first place.

Smit adds that you should remember that you have to pay taxes on death and life cover, which is whole cover.

“On the other hand, when it comes to business assurance, term cover is a tool that can be used to cover a loan that the business needs for a certain term,” says Smit.

According to Mmapula Mokoena, head of marketing at YALU, if you have debt, you might want to have both whole life cover and credit life insurance, which is a form of term life insurance.

“The credit life insurance will cover your debt in case of retrenchment, disability, or death, while whole life can be used for your family’s well-being after you pass on, instead of being used to settle your debt,” says Mokoena.

READ MORE: The impact of mental health on life cover premiums

Make sure you have sufficient cover

Mokoena recommends shopping around because there are plenty of good options for life insurance on the market.

“Ensure you are adequately covered for the needs you have. It’s important to understand the cover you have so you can avoid unpleasant surprises when you or your family needs to claim,” says Mokoena.

“Remember, it’s worthwhile making sure you have sufficient cover to settle your debt, should you pass away, so that your family can continue the lifestyle you’ve provided them by using any whole life insurance you may have,” he adds.

Kagura suggests discussing this with a financial adviser. There are a number of factors to consider around your financial and family situation to determine the appropriate type and amount of cover.

If you don’t have life cover yet, click here to find out more.

Recent Articles

Featured Top 5 things to consider before taking on further credit

Nowadays, the process of attaining credit has become easier and faster. Although applying for, and receiving cash on the same day may excite potential lenders, it doesn’t come without serious repercussions if you’re not wise. 

These factors will fluctuate your car insurance excess

When you take out car insurance, your monthly premium is a given. However, you may also need to pay an excess amount if you claim from your policy. But which factors may increase your excess, and how can you bring it down?

Is income protection available to everyone?

If you’re involved in an accident and you’re unable to continue working, how will you ensure that your bills are paid? One way to prepare for this is to take out income protection cover. However, can you do this if you’re a freelancer?

Aligning your financial goals in a relationship

When two people enter into a partnership through dating, marriage, co-habiting, etc, usually theres an enormous amount of effort spent on finding commonalities. However, this process often neglects the financial status and long term goals of each member.

Deals

Bakwena Day Spa Black Friday Vouchers

Price: From R549
When: Until 27 November 2020
Where: Broederstroom, Centurion, Kuils River

One & Only Hotel Complimentary Nights

Price: Available on request
When: Until 17 December 2020
Where: Cape Town

Spur’s Unreal Breakfast Special

Price: R39.90
When: Daily
Where: Nationwide


Latest Guide

Guide to debt rehabilitation solutions