Life Insurance Issues Examined

The pop legend's passing has highlighted the subject of life insurance People are re-examining their life policies after Jackson's death

While pop icon Michael Jackson certainly didn't expect to die at the age of 50, he took the right precautions by writing out a will and, presumably, providing enough cover for his children.

Many people are now examining their own life insurance to see if, heaven forbid, they die at a young age, their families are not left in the lurch.

In many countries around the world, exclusion clauses exist in life insurance policies that will not provide cover in the case of suicide.

However, the Corporate Actuary at PPS Insurance, Chris de Klerk noted that this is not so much the case in South Africa. "While life policies in some countries have a permanent suicide exclusion clause, in this country, the typical policy will only not pay out if the policyholder commits suicide in the first two years of taking out the policy," he said. "This exclusion clause would fall away after the first two years."

Ensuring that dependents are left free of debt and worry is one of the most important things to consider when taking out a life insurance policy, according to de Klerk. "You can take out policies for a specific reason, such as covering an outstanding home loan and cede it to the institution through which you have obtained the loan," he explained, "so that if you die, the policy covers the outstanding home loan."

De Klerk also strongly advises to nominate beneficiaries in a life insurance policy, otherwise funds get paid out into the estate and it could "take years before the beneficiaries receive anything". By stipulating specific beneficiaries, payouts are usually made quickly.