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Choosing the Right Life Insurance Product

We provide comprehensive pure-risk life and disability insurance products. Comprehensive means that you are covered should you die or become disabled, whether this is due to health or accident related causes, as set out in our policy documents. Pure-risk means that our products do not include a savings element, and do not offer a surrender value at the end of the term or upon termination of the policy. We do not provide investment, savings, or medical insurance products.

Three broad categories of life and disability insurance are offered:
  • Term insurance
  • Whole Life insurance
  • Loan Protection insurance

Term Insurance

Term insurance products provide cover for a defined period of time. For example, this period may be 10 or 20 years. Under a term insurance policy you are covered from the policy inception date until the end of the defined period. At the end of this period the policy terminates, and, should you still require life insurance, you will need to reapply, and, may be quoted a different premium, or potentially declined. Term insurance products are generally cheaper, and may provide cover during a period of your life when you really need it, for example while you are supporting young children, or while you have significant personal debt.

Note that if you take out a term insurance policy you are not guaranteed of being granted a new policy at the end of the term, especially if your health situation has materially changed.

When Term Insurance is Right for You

As an example, Agnes (who is HIV+) decides on her 41st birthday that she wanted to take out life insurance to provide for her teenage daughters’ financial well being in the event of her death. Given that her daughters are teenagers, she assumes that they will have completed their schooling and any tertiary education within the next 8–10 years, and be financially self-sufficient. A 10-year term policy will provide her with peace of mind for the next ten years.

Because her risk of death during the ten year period is significantly lower than in the next twenty or thirty years, the 10-year term policy offers her the most affordable cover available. Given that she believes her daughters will be independent at the end of the ten year period, she knows she is only paying for cover while she (and her daughters) need it. Top

Whole Life Insurance

Whole Life insurance products provide cover indefinitely, or until such time as you elect to cancel the policy or stop paying your monthly premiums. Whole Life insurance products are a little more expensive, but may provide you with additional peace of mind that your life insurance cover will always be there, whenever you may need it.

Whole life policies may offer different premium options, for example, a level premium policy where the premium stays level, or an escalating premium policy where the premium increases by a defined amount every year. While a level premium policy may make for easier budgeting, an escalating premium may enable you to take more cover now, and make use of future pay increases to pay for the premium increments.

When Whole Life Insurance is Right for You

Taking a whole life policy makes sense for someone who wishes to obtain insurance at a relatively young age—to benefit from the somewhat lower premiums available to younger people—and who anticipates that they will need life insurance for more than twenty years.

As an illustration, suppose Richard has recently turned twenty five—he is married and has started work. He plans on starting a family in the next 3–5 years and wants to provide for their needs. He has just recently been diagnosed as HIV+, and wants to apply for life insurance as soon as possible. He chooses a Whole Life insurance product to secure cover for as long as he may need it, and elects an escalating premium option to allow him to take the most cover he can afford now, while benefiting from future salary increments as his career progresses. Top

Loan Protection Insurance

Loan protection policies provide a benefit amount that declines over time, structured so that, in the event of death or disability of the life insured, this insurance policy benefit should be equal to the (declining) outstanding balance on a loan of the same term as the policy.

Lenders will often require that you, the borrower, cede a life insurance policy to them as a condition of granting a longer term loan (typically home and/or business loans). This ensures that if you die (or perhaps are permanently disabled), the loan will be settled and your family will retain ownership of the house (or business) asset that you had bought.

Note that you must match the term of the policy to the term of the loan. A 10-year loan protector product will not cover the outstanding balance on a 20-year loan, even during the policy’s 10-year term.

When Loan Protection Insurance is Right for You

Assume Eric wishes to purchase a home for his family. He applies for a bond at his bank, and the bank informs him that his bond is approved—subject to his cession of a life insurance policy to the bank as security.

Eric must first secure an appropriate life insurance policy. He selects a loan protection policy, and his application for life insurance is approved. His life insurance policy is issued, and he cedes this policy to the bank by completing the appropriate cession forms. Should he pass away before his bond has been settled (and as long as his policy is in force) the balance outstanding on his home loan will be settled. Further, in the event that he has repaid his home loan ahead of the schedule required by the bank, any portion of the life insurance payout that is left over after settlement of the bank loan will be paid to his beneficiaries. Top

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Living with HIV
AllLife sends reminders for tests and monitors results. This helps clients to stay alive.
 
The Economist
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