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Having comprehensive short- and long-term insurance, along with effective risk management strategies, is essential to safeguarding your future and ensuring financial stability.
Numerous financial products and structures can be implemented to protect yourself and your loved ones in the event of an accident, theft, natural disaster, or death.
Please see a checklist of the protections you can put in place.
Short-term Risk Checklist
- Emergency Fund: Keep a lump sum equivalent to 3 to 6 months of living expenses in an easily accessible money market account. This will help provide access to savings for small, unexpected accidents or financial needs. Although an emergency fund is not an insurance product per se, it is the first type of cover one should have in place.
- Medical Aid & Gap Cover: Ensure you have adequate health cover in place. The appropriate medical aid will help cover hospital expenses and doctor’s visits when you least expect it. Gap cover will provide additional funding where you may need expensive major surgery or longer-term care.
- Motor-vehicle Insurance: Considering the costs of cars and repairs, motor-vehicle insurance is an important measure to help prevent a major expense due to an accident, weather damage, or theft.
- Household Contents Insurance: This insurance ensures that, in the event of damage or loss through theft, fire, or natural disasters, you can replace or repair your possessions without facing significant financial hardship.
- Portable Possessions Insurance: This insurance covers personal items that you frequently carry with you, such as phones, laptops, cameras, and jewellery against the risk of theft, loss, or damage.
- Homeowner Insurance: Coverage for your home includes protection for the structure, its contents, and any attached structures against risks like fire, theft, and natural disasters.
- Liability Insurance: It is important to have insurance that covers you if you accidentally cause injury to others or damage their property. While your home and car insurance might include some of this protection, you should think about other types, like public, professional, and employer’s liability to make sure you are fully covered.
Long-term Risk Checklist
- Income Protection: This cover will provide a regular income if you become disabled and can’t work due to illness or injury. It is important to check how you are covered, e.g., in the event of impairment (losing a limb) or disability, and to what extent you will be covered (e.g., own occupation or any occupation).
- Lump Sum Cover: If you become disabled, suffer an impairment, or are diagnosed with a critical illness like cancer, stroke, or heart attack, the right disability, impairment, and critical illness cover can help pay off debts, cover medical expenses, and afford necessary home modifications. This cover can be taken out on your, or a loved one’s life – for example, covering adult children.
- Life & Funeral Cover: On your passing, your estate (your loved ones) may need to find funding or sell their inheritance if there is not already funding for any of the following expenses:
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- A funeral (which can exceed R 50 000),
- Taxes like estate duty (20% of your assets over certain thresholds) and capital gains tax
- Outstanding debt,
- Legal fees like property conveyance fees, executor fees (3.5% to 4.025% incl. VAT on average), or fees related to setting up a trust for a minor,
- Wishes as provided in your Will
- This cover can be taken out to pay out if you pass away, or if one of your loved ones, including your spouse or child, passes away. It is important to note that your age and state of health will impact your eligibility for this cover.
- Education Policies: Additional life cover products can be taken to secure your children’s education if you pass away.
Business Risk Checklist
- Keyperson Insurance: A crucial employee like an owner, director, or top executive passing away can significantly impact a business. Keyperson insurance provides a payout to help cover the costs of finding a replacement and maintaining operations during this time.
- Contingent Liability Cover: This provides cover in the event of a keyperson in the business untimely passes away and the company had a loan, overdraft facility, or personal guarantee that needed to be covered.
- Preferred and Deferred Compensation: These may not necessarily be pure risk policies but are useful mechanisms from employers to incentivise staff to remain employed for the long term. The employer will save additional salary payments in a separate investment account to be accessed by the employee at a future date.
- Buy-and-sell Agreements: These are contracts that partners in a business will set up to outline what happens to their shares if they leave or pass away.
- Business Specific Cover: Business risks specific to your industry can be taken to ensure uninterrupted business dealings, in the event of damage, loss, financial loss, liability, or theft.
Financial Planning Risks Checklist
- Retirement Plan: It is important to review your retirement plan and ensure you are still on track toward a comfortable retirement.
- Estate Plan: It is important to have an up-to-date Will, a professional executor, adequate funding for your costs at death, testamentary trusts for minor children, and ensure that your loved ones will have easy access to savings while your estate is being wound up. Winding up estates can take 12-18 months and when foreign assets are included, in some cases, a few years.
- Investment Diversification: Protect your investments against inflation and volatile markets by spreading your investments between different assets, geographies, and fund managers.
Action Plan
- Get Professional Advice: A risk specialist can help you identify risks in your planning, provide information on more short-term, long-term, or business risk covers, and have a deep understanding of what individual insurance companies provide.
- Create a Financial Documents Folder: Keep important financial documents and original copies in a safe and easily accessible folder.
- Review Your Cover Regularly: After this exercise, set time aside on an annual basis at least, to establish if you are still up to date.
For more guidance and the next steps, visit our Insurance Solutions page.
