Insurance is one of those purchases that you hate to spend your money on although you know it is a necessary investment that will protect you in the future. The money you spend on insurance each month is minuscule compared to what it would cost you in the event you need the pay-out.
Since insurance is a product that you can tangibly get your hands on, many people are reluctant to fork over their hard-earned money. When it comes to insurance, the saying “it is better to be safe rather than sorry” rings true!
Here are five types of insurance that you should have to protect your household:
1. Income Protection
The biggest financial asset you can have is your income, so taking out income protection insurance should be your first purchase. Think about the amount of money you will earn from your income from now until you turn 65 and imagine that in one lump sum. When you look at it that way, it can be a lot of money.
Should you find yourself in a position where you are no longer able to earn an income, having income protection can cover you until retirement age. It is important to make sure you are covered for both permanent and temporary disability. The benefit you receive from income protection is calculated as a percentage of your income.
2. Medical Scheme Cover
Medical costs can be astronomically high, especially for specialist treatments and private hospital care. For this reason, medical aid cover is a non-negotiable when it comes to insurance.
It can also be useful to add on gap cover if you can afford it, to cover the difference between what your medical insurance covers and what specialists charge. Alternatively, you could choose a plan that minimises the need for gap cover and covers your medical needs in full.
3. Short-Term Insurance
If you own valuable assets like a car or a house, it is highly advised that you take out short-term insurance. Even if you have fully paid them off, you need to have insurance that can cover those assets if something happens to them and the contents inside.
If you can’t replace it with your personal savings, then it’s a good idea to cover it with short-term insurance.
4. Life Cover
If you have a family, then you should most certainly take out life insurance. This insurance will cover you any debt you may have and serve as an income for your dependents when you are gone.
Ideally, you also want to have funeral cover included in your life insurance to ensure your family is not left with additional expenses at a very difficult time. Life cover is normally calculated as a multiple of your annual salary, so ensure that you are happy with the cover it will provide for your family.
5. Lump-Sum Disability Cover
Depending on your unique situation, you can add to your life cover with lump-sum disability cover. This type of cover will only be paid out to in the event that you have been diagnosed with a permanent disability.
Depending on the severity of the disability, a lump-sum disability policy can cover a percentage of the costs you may incur for the treatment required after a disabling incident.
Additional Cover
If your budget allows, you can take out additional cover for dread-disease and critical or severe illnesses. The payout is calculated based on the severity of your illness and possibly cover some additional expenses related to the illness. While this is not a must-have insurance for every household, if you can afford it, it is a great add-on to have.