Why life cover is crucial for young families

Johann Rossouw | 13 May 2024

Johann is an Associate Financial Planner at Fiscal Private Client Services. He holds the Certified Financial  Planner® accreditation and has a keen interest in personal finance and how financial markets affect our everyday lives.

We have all seen those life insurance ads on TV: “For only R500 a month, you can get life cover of R2 000 000”. But what is life cover? And do you really need it? Life cover may feel like a bit of a grudge purchase, but in certain instances, such as when you have a young family, life cover can be a necessity.

Life cover is a long-term insurance policy that pays out a cash lump sum to your nominated beneficiaries in the event of your death.

Life cover can be used to:

  • Provide for the future needs of financial dependents;
  • Provide cash to meet the expenses that arise when you die; and
  • Provide cash to pay off remaining debts.


It’s crucial when your family is young

For young families, the early years are a whirlwind of joy, exhaustion and financial responsibility. Between caring for children and building a future, life insurance can often feel like a distant concern.

However, for families with young dependents and debt, life cover is not a luxury – it's a lifeline.

The primary purpose of life insurance in this scenario is to provide a financial safety net in the event of the unexpected.

With a young family, the loss of a parent, particularly the primary earner, can be financially devastating. Life insurance provides a lump sum payout that can be used to cover immediate expenses such as funeral costs and outstanding medical bills. This crucial buffer prevents these burdens from adding to the emotional turmoil of loss.


Debt repayment

Life cover also plays a crucial role in debt repayment. Most policies allow beneficiaries to designate the payout towards specific debts. This ensures that creditors are paid off, preventing the burden from falling on grieving loved ones. Life insurance ensures such financial hardship doesn't compound the emotional loss.

More importantly, life cover safeguards the family's long-term financial well-being. The payout can be used to maintain the current standard of living of the family, ensuring children can continue their education and essential needs are met. Imagine a scenario where a young couple has a home loan and student debt.

Without life insurance, the surviving spouse may be forced to sell the family home or struggle with overwhelming debt, creating an unstable environment for the children.


Is it affordable?

The affordability of life cover is another factor that makes it particularly valuable for young families. Generally, younger and healthier individuals qualify for lower premiums. This makes it a relatively small investment with a significant return in the event of a tragedy.

Many companies even offer term life insurance, which provides coverage for a specific period, often aligning with the years until the children are financially independent. This allows families to tailor the coverage to their needs and budget.


Don’t avoid the uncomfortable topic

While death is an uncomfortable topic, it's a necessary conversation for parents with young children. By taking the time to secure life cover, parents are demonstrating their love and responsibility.

Life insurance provides peace of mind, knowing that their family will be financially protected even in the most difficult circumstances. This allows them to focus on what truly matters – raising their children and building a happy life together.


Don’t forget disability cover

It's important to note that life cover is just one piece of the financial protection puzzle. Young families should also consider disability insurance, which provides income if the primary earner is unable to work due to illness or injury.

Additionally, parents with children need a well-drafted will that ensures the smooth distribution of assets after death and how the children will be cared for.

Ideally, you should have all these measures in place, but if you don’t have them in place, start with life cover as an essential safeguard for young families with debt. It provides financial security in the face of tragedy, ensuring loved ones are cared for and the family's future remains stable.

By putting the right life cover in place, young parents aren't just protecting their families financially, they're demonstrating their unwavering love and commitment to their children's well-being.