Many people make the mistake of either getting insurance they don’t actually need or not getting the right types of insurance for their needs.
Knowing your risks helps you identify the things of value (your assets, which includes yourself) that need to be protected, but without knowing what types of insurance are out there, you could easily get confused as to what’s right for you. You could certainly chat to a financial advisor, but don’t take the advice of just one person, no matter their qualifications, when deciding to buy life insurance. Rather get informed and make some educated comparisons of your own.
What’s the Difference Between Short-Term and Long-Term Insurance?
Insurance can be broadly divided into short-term and long-term. Short-term insurance is what we like to call “stuff insurance” because it’s there to protect against bad things happening to your stuff. It covers assets like your car, house, jewellery, sunglasses, art collection, bicycle, etc. Insurance companies that provide this type of insurance are called general insurers.
Long-term insurance is “you insurance” because it’s there to cover bad things that happen to you. It covers life-changing events like becoming seriously ill, disabled, or dying. Insurance companies that provide this type of insurance are called life insurers, and currently that’s where Sanlam Indie operates.
What Are Some Examples of Short-Term and Long-Term Insurance?
Some examples of short-term insurance products are vehicle insurance to protect your car against theft or an accident and contents cover to protect things of value in your home.
Some examples of long-term insurance products are income protection to protect you if you can’t work anymore, disability cover to protect you if you become disabled, and critical illness cover to protect you if you get a serious condition.
To demonstrate the difference between short-term and long-term insurance, let’s look at protecting one of your assets: your home. To protect the physical building against damage from fire, break-ins, and natural disasters, you’d get building insurance, which is a short-term insurance. But, to protect yourself and your family against the financial burden of having to cover an outstanding home loan if you die or can no longer work because of illness or disability, you’d get life insurance, which is a long-term insurance.
How Do I Know Which Types of Insurance I Need?
It’s pretty easy with short-term insurance to assess whether or not you need it. If you have an asset, you probably need insurance to protect it. But it can be a bit more tricky to work out whether or not you need life insurance. For example, let’s say you’re 25 years old, healthy, single and have just started your first job. Do you need long-term insurance and, if you do, which type do you need?
Although we can’t advise you on exactly what you need, we can try to help you understand whether or not you might need long-term insurance based on your situation. Ask yourself these questions:
Are you human (i.e. could you one day die)?
Do you have a job?
Could you one day become disabled and no longer be able to work?
Is there a chance that you could one day get seriously ill?
Do you own property?
Are you married or about to get married?
Are you having a baby or raising a child?
Do you have people who depend on your income to survive?
Do you have your own business?
If you answered yes to any of these, then you should probably look into getting life insurance.
What Types of Life Insurance Are There?
Life insurers offer a range of products with different benefits, but some of the most common ones are life insurance, death income protection, disability cover, disability income protection, critical illness cover, and funeral insurance.
Check out Sanlam Indie’s life insurance products to learn more about how they can protect you.