The current economic conditions in the country
make it an absolute necessity to take stock
of your personal financial situation,
and to make any changes that might be necessary
An important step to take, at every stage of life, including in your retirement. African Unity founder and Executive Director, Herman Lombard says that people should evaluate their financial standing at every stage of their lives, including as you prepare for retirement and once you have reached their golden years.
Insurance is big business and there are financial products that cover just about everything. But how do you establish which financial products are absolutely necessary or whether what you have is enough?
The latest unemployment statistics from Statistics South Africa have revealed that the current unemployment rate in the country stands at 29%, – the highest in 11 years. This, along with President Cyril Ramaphosa’s recent prediction that more jobs are bound to be lost due to technology, globalisation, climate change and other economic challenges, forces South Africans to take stock of their current financial situation, in a bid to maintain some control in the future.
Insurance experts believe that it is important to have balanced cover, with medical aid, life cover, funeral cover, home insurance and car insurance regarded as top priorities.
Lombard urges consumers to consider all their financial products together to calculate the cost, compare the benefits and to identify gaps or overlaps, by taking the time to do a regular financial needs analysis.
“You need to make sure that you are not under-insured or over-insured. Being under-insured leaves your family vulnerable, should anything happen to you. Yet at the same time, being over-insured will have you spending money on something you don’t need.”
“While there are people who consider retiring by the age of 55, it may be better to continue working towards bolstering your retirement funds and any home improvements or changes you may need, before you stop earning an income. This will allow you to enjoy a leisurely retirement.”
“Ageing is, unfortunately, also often accompanied by ailments and illness. It would be wise to consult your financial advisor about your investment portfolio to make sure that your medical aid sufficiently covers you against illnesses, so that you won’t have to touch your retirement funds to pay for medical expenses,” he adds.
According to Lombard, many people waste millions on policies that overlap or double up on cover. He says that having double cover does not necessarily mean you will be paid out twice for a claim – therefore spending extra for this is a waste of money.
So, before you take out extra cover, do your homework on the following:
- Home loan life cover – Standard life insurance policies usually pay out the benefit to the beneficiary and this can be used for settling the outstanding balance. It may, therefore, not be worth spending money on home loan life cover.
- Additional health cover – Insurance cover for illnesses like cancer is seen as important for most people. It is obvious that treatment like chemotherapy is expensive, but some experts advise against taking out extra coverage, since most medical aids actually cover treatment for the disease. Check with your insurer or financial advisor whether this is necessary.
- Travel insurance – Before taking out travel insurance, examine the health and life policies you have, to find out how accidents and injuries during your travels or missed flights are covered. Life insurance policies usually cover the insured, in the event of a fatality while traveling. Travel protection is also sometimes available if you are using your credit card for booking your travel, so check with your bank and travel agent.
Lombard says that a financial needs analysis, which can be done by a qualified financial planner, is helpful when taking stock of your financial profile, as the country faces economic uncertainty.
“It will give you an overview of what you have and whether you fall short of any cover. You’ll be able to scrutinise your current situation, identify areas that need to be streamlined and set goals for where you need to be in terms of retirement, income protection, and other goals you wish to achieve,” he concludes.
Articles that may interest you:
https://youve-earned-it.co.za/finance/tax-guide-for-south-african-seniors/