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My Money, My Business, My Life: Proof of life after death, part B

I need to decide how much money my dependants will need to enable them to live until they can earn their own salaries.

The proof was given last week.  And we covered two aspects: your will, and funeral insurance.  In Part B now, let’s do life insurance.

First, let’s state the obvious.  Sadly, death can occur at any point in the table/calendar above.  We may not make it to age 84. The most responsible thing to do is to plan as if death could occur NOW.

This means that I need to decide how much money my dependants will need to enable them to live until they can earn their own salaries.  It’s likely to be a huge amount – but they’ll need it only when I die.

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Can I use my death to trigger the payment of adequate cash to them?  Yes I can – life insurance!  For an affordable monthly premium, I could buy a policy that pays (say) R6,000,000 when I die.  I need to talk to an insurer.  Buying an insurance product means paying NOW for something you (or, more precisely, your beneficiaries) will own later.  This is quite contrary to buy now, own now – that applies to most ordinary purchases.  But paying for something you won’t see – that’s essential financial discipline.

When considering life insurance, I need to think about DEBT insurance too.  Say I’m paying for a house (or a car, or furniture).  When I die, do I want my loved ones to be burdened with the monthly payments that will still be due?  If the answer is no, then I need to insure the debt.

This means that when I die, whatever debt I’ve insured, will be paid off.  It will become the property of my beneficiary, according to whatever I’ve written in my will.  I need to talk to an insurer.

Debt insurance may be something you never actually use (for the simple reason that you don’t die while still paying off the debt).  Should you then think of your debt insurance as lost?  Never

Insurance is about risk and peace of mind.  If the risk event (your death before paying off your debt) does not occur, that’s okay.  What you paid for was peace of mind – and that’s priceless.  It could just as easily have gone the other way.

There are other ‘risk events’ we could insure.  Think of hospital insurance, dread disease insurance, disability insurance, and income insurance.  In all this, the underlying principle is the same: you are insuring against the risk, for peace of mind.  And whatever you choose to buy, the key test is: can I afford it?  Can my salary accommodate this extra spending?

In the two Parts of PROOF OF LIFE AFTER DEATH, we discussed your will, your death, the role of life insurance, and how important it is to insure debt.  We’ve got our greatest fear (death) out of the way.  Here I must put words into the mouth of an anonymous sage: “If we can face the fact of death with acceptance and sound financial planning, only then can we really enjoy spending the money we earn.”

I guess you never thought managing money could be this much fun!

 

Jay Pillay.

Jay Pillay’s first two critical decades were spent where his first decade began – in Pietermaritzburg. After studying at ML Sultan Technikon in Durban (anyone remember that place?), he then joined the sugar industry, working in Tongaat, Durban, and Xinavane – a sugar mill village 120km north of Maputo. Oh yes – there was a brief period of unfaithfulness, when he flirted with aluminium in Richard’s Bay. Upon retirement, he and his wife Dorothy – settled in Southport.

Jay began writing about salary management (for ordinary people living on a salary) in the early 2000s. Many of his articles were published by The Ripple Effect, a Durban-based corporate newsletter. In all his writing, Jay says he attempts to emphasise the big picture in salary management: it’s not just about making it to your next payday – it’s about making it to the end of your working life. It’s not just about your working life – it’s about your retirement too. It’s not just about the cost of living – it’s about the cost of dying too. It’s not just about you as a salary manager – it’s about your dependants too.

This 16-part series is being published h

There’s a second finally. To daughter Nikki, thank you for the picture.

 

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