Just as you make sure that your accommodation is booked, your flights are confirmed or your car is roadworthy, and your bags are packed with all essentials before embarking on your travels, you should also make sure that your personal financial affairs are in order before going on your December holiday.
Peter Dempsey, deputy CEO of the Association for Savings and Investment South Africa (ASISA), says with less than a month to go before corporate South Africa starts shutting down for the holiday season now is a good time to reflect on your personal finances.
For complete peace of mind, make sure you can tick all the points on the check-list below before you go on holiday, says Dempsey.
1. Cover against the proverbial bus
By the end of this year some 130 000 South African income earners would have lost their lives, while an estimated 43 000 earners would have suffered total and permanent disability. Given South Africa’s poor road safety track record over the festive season, many of these actuarially predicted deaths and disability cases will sadly happen in the next month or so, says Dempsey.
Dempsey says every income earner should make sure that they have enough death and disability cover in place. “As an income earner it is your responsibility to make sure that your family is looked after financially should you die. In the case of disability, the additional financial impact of having to care for the special needs of a disabled family member no longer able to earn an income is often underestimated.”
The 2013 Life and Disability Insurance Gap Study conducted on behalf of ASISA by True South Actuaries & Consultants in partnership with the UNISA Bureau of Market Research (BMR) shows that people earning more than R150 000 a year are most critically underinsured.
On average households supported by these earners would need to find an additional income of R10 000 a month should a breadwinner die and R20 000 a month to plug the gap should one of the earners become disabled. The alternative would be to cut household expenses by 36% in the event of death or by 46% should the earner become disabled.
What to do now: If you currently do not have life or disability insurance cover, meet with a financial adviser. It is important that you decide on the right level of cover with the help of a trusted financial adviser as your decision will be influenced by how much you can afford to pay in premiums, your number of dependents, your life style, and your debts.
If you do have life insurance policies, meet with your financial adviser to review the cover. Most people underestimate how much life and disability cover they require.
2. Cut the red tape for your beneficiaries
Make sure that you have completed the beneficiary nomination form for your life policies. If you do not specify a beneficiary, your life insurance proceeds form part of the estate. Since your bank accounts will be frozen on death, this means your family will have to wait some time before they receive money, and only after all debts have been repaid by the estate.
If you do have a beneficiary nomination in place, the life insurance company will pay out within days provided the necessary documents have been submitted and no foul play is suspected in the cause of your death.
What to do now: Check with your financial adviser or the life company whether you have previously completed a beneficiary nomination form. If you have, ensure that your nominations are still relevant and that the percentages of the proceeds to be allocated to them are correct.
Also remember that trustees of all pension funds and retirement annuities (RAs) have to abide by Section 37C of the Pension Funds Act, which states that the trustees of a retirement fund are obliged to consider all dependents together with nominated beneficiaries when allocating the death benefit. Therefore, when you nominate beneficiaries for your pension fund or RA, make sure you put down the names of all people who are financially dependent on you, even if it is your ex-spouse. This will speed up the process and ensure that those who did depend on you financially continue to receive financial support. If your beneficiary nominations are incomplete or not up to date it can take the trustees up to 12 months to finalise a payout.
3. Document your last wishes
Make sure that you do not die without a will. This would result in endless and unnecessary complications for those you leave behind.
If you have children, give careful thought to what should happen to them if you and your partner are killed at the same time. While this is one of the most difficult situations to think about, it is also one of the most important. Often this decision will also impact on your beneficiary nominations.
What to do now: Contact your financial adviser, your lawyer, your bank or your life insurer for assistance. To speed up the process, give careful thought as to what your will must state. The list below will also help you prepare.
4. Emergency contacts
Does your family know whom to contact regarding your finances should the proverbial bus strike and you do not return home one day?
What to do now: Compile a list of people that your family should contact in an emergency. Top of your list should be your financial adviser, together with your policy numbers and details of other investments.
You should also list bank accounts, medical aid details, and short-term insurance details, especially if these are in your name. If you have debts, list the details as well so that the person dealing with your estate can make contact with the relevant institutions. Most importantly, make sure that everyone knows where to find this list. Also maintain an up-to-date list of assets and liabilities, where they are held and what the values are.