What is the difference between life cover and death income?
Well life cover pays a lump sum after all the underwriting and documentation requirements are met and have a more stringent process at claim stage.
Death income however pays a monthly income to tide your dependent over until the life cover is paid out and has a less rigorous process at claims stage.
Some companies have a minimum monthly income up to 60 months and some 24 months. The main reason to include this in one’s estate planning is to ensure the family still receives an income while the estate is being wound up.
This has numerous benefits as the bereaved family are not burdened with tedious paper work and grieving simultaneously.
If there is a monthly income that’s continued there is no need to make any rushed and uninformed decisions as to how to invest or spend the lump sum.
It also ensures a smooth and continued income so that there are no major disruptions to the family’s or business’ financial situation.
While some of the benefits of both products seem to overlap e.g. life cover can be invested to ensure a monthly income ideally after all debts are settled and death income also provides a monthly income the benefit is that the death income is an easier process to claim from and is not held back while the estate is wound up giving the beneficiaries piece of mind that immediate monthly obligations will be met.
How much you need is determined by your monthly budget and you must determine how much your dependents need from you on a month to month basis to ensure commitments are honoured like lights, water, insurances, debt, the mortgage, vehicle finance, medical aid, food and living expenses.
If you don’t have the death income benefit, while the estate is being wound up the family could end up with monthly bills that pile up and the sad possibility that the lights, could be cut off or medical aid benefits stopped.
The family may also be forced to dip into savings or incur debt by borrowing money to honour the commitments while the estate is wound up.
The advantage of the death income benefit is the peace of mind of dealing with a death without having to deal with financial disruption.
