Understanding Insurance: Life, Funeral, Car and Household Cover

Insurance salespeople call, your bank offers cover, your employer has a group scheme, and you already pay for a funeral policy. Do you have too much, too little or the wrong kind? Understanding the basics helps you protect your family without wasting money.

What is happening

Insurance moves a risk you cannot afford from you to an insurer, in exchange for a monthly premium. In South Africa it falls into two groups.

Long-term (life) insurance covers you as a person:

• Life cover pays a lump sum to your beneficiaries when you die.
• Funeral cover pays a smaller amount quickly for funeral costs.
• Disability cover pays if you can no longer work because of illness or injury.
• Income protection pays a monthly amount while you cannot work.
• Dread disease (severe illness) cover pays a lump sum on diagnosis of a listed illness, such as some cancers or a heart attack.

Short-term (non-life) insurance covers your things:

• Car insurance: comprehensive, or cheaper third-party cover for damage to other people's cars.
• Household contents: your belongings inside the home.
• Building (homeowners) insurance: the structure itself, usually required if you have a bond.

Key words to know: the excess is the part of a claim you pay yourself. Underinsurance means insuring something for less than it is worth, which can reduce your payout. Exclusions are what the policy does not cover. Always tell the insurer the truth when applying. Leaving something out can lead to a rejected claim. Many people who work have group life and disability cover through their employer, so check before buying more.

Signs to notice

• You do not know what each of your debit orders for insurance covers.
• You have several funeral policies but no life or disability cover.
• Your household items are insured for an amount you guessed years ago.
• You have never read your policy exclusions.
• You do not know what cover you have through work.

30-second self-check

Answer yes or no.

• Do people depend on your income?
• Would your family struggle if you could not work for six months?
• Is your car financed or worth more than you could replace from savings?
• Do you own a home or valuable household goods?
• Are you unsure what your employer's group cover pays?
• Have you not reviewed your insurance in the last two years?

0-1 yes: Your insurance needs may be simple. Check your existing policies are still right for you.
2-3 yes: You likely have some gaps. List your policies and compare them with what your family would need.
4 or more yes: Insurance really matters for you right now. Review your cover with an FSCA-authorised adviser soon.

What you can do next

• Today: List every insurance debit order and write down what each one covers.
• This week: Ask HR what group life, disability and funeral cover you have through work.
• This month: Check your household and car sums insured against today's replacement values, and ask an FSCA-authorised adviser to review gaps.
• Update your beneficiaries after marriage, divorce or the birth of a child.

Your tool

Insurance Needs Check - answer questions about your family, income and assets to see which types of cover matter most for you and where you may have gaps or duplicates.

When to get professional help

Speak to an FSCA-authorised adviser before buying or cancelling cover, and to an ombud if a claim is unfairly rejected. Worry about what would happen to your family if something went wrong can keep people up at night. Putting the right cover in place often brings real peace of mind.
Who can help: FSCA-authorised insurance adviser, FSCA-authorised financial planner, money coach

Getting help in South Africa

The Financial Sector Conduct Authority (fsca.co.za) lets you check that an insurer or adviser is authorised. The National Financial Ombud Scheme handles complaints about insurers and banks for free. The FAIS Ombud (faisombud.co.za) handles complaints about financial advisers. Your Cleared Mind EAP can connect you with a money coach to list and understand your policies.