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Many people see life insurance as a ‘nice-to-have’ – an optional extra to protect a family’s income should the breadwinner unexpectedly pass away or when that person becomes disabled, injured or ill. However, life insurance deserves an important place in any long-term financial game plan.

Think about it this way: investing is about growing your wealth and beating inflation, while insurance is about protection against events that can deal a devastating blow to your finances. The two go hand in hand. One accident or health event and you could be drowning in debt – no matter how well you’ve been saving up to that point.

There are many types of life insurance policies out there, so it’s important to find one that fits your unique circumstances and personal goals. Here are four reasons why life insurance should play a crucial role in your financial game plan.

It's as important to choose the right financial
partner as it is to choose any other partner in life.

1. Protect your income earning ability

If you’re part of a couple, both of you are working and you’re both putting money away each month, you’re probably in good shape to reach a comfortable retirement. However, that retirement goal relies on both of you staying in the game, so to speak. It relies on your combined earning potential over the next 20, 30 or 40 years.

If you or your partner should pass away, fall ill or become disabled, it will be very difficult to get over that loss through your own financial means – even if living expenses are less for one person instead of two. The right life insurance cover bridges the gap of that income loss.

2. Build your legacy

You work so hard for your money that you certainly have big dreams for it – besides paying for a comfortable retirement. Money provides the opportunity to dream and live freely – but only if you are around to make those dreams come true. Life insurance continues to build or protect your legacy should you or your partner be unable to earn an income due to illness or disability, or an untimely death.

3. Keep your partner’s retirement savings on track

Time has a huge impact on retirement savings. Compound interest means that your money grows particularly fast towards the end of your retirement savings journey – when you earn large amounts of interest upon interest.

But that’s if you both started investing early in your careers. Many couples find themselves in a position where they have to play catch-up on their retirement savings in the last 10 years leading up to retirement. The last thing you want to happen then is to not be able to hit your targets if you lose a partner or if one of you becomes ill/disabled. As they say, you can't invest your way out of an untimely death.

4. Boost your retirement savings

Many life insurance products now come with an incentive to reward you for sticking with your financial plan. Sanlam’s Cashback Benefit, for example, is an optional extra which can be added to your life insurance at an additional cost of 35% on premiums. With this benefit, if your cover is still intact after 15 years, you will receive up to 100% of your premiums back in cash.

You can immediately take the money (tax-free) or let it grow till you reach retirement age – giving you a great boost when you need it most. Should you need to claim, your beneficiaries won’t pay tax on your life insurance payout. And if you get diagnosed with a terminal illness, you also have the possibility of an immediate tax-free payout.

Get a further boost on your Sanlam investment

While we’re talking extras, Sanlam’s Cumulus Investments is a tax-efficient solution that gives you an upfront bonus of 5% to boost your initial investment amount – giving your investment growth a head start. From R1 000/month, you can enjoy the peace of mind that your loved ones will receive the proceeds of your investment in the event of your death. A built-in guarantee in certain investment funds will aim to limit losses of the money you invested in a declining market, and you can take your money offshore as part of the fund selection for your investment.

If you prefer something more affordable and tax efficient, Sanlam Tax-free Investments provide an easy and effective way to save for your long-term goals, without having to pay tax on interest, dividends or capital gains. Starting from just R350/month, you have the ability to withdraw money at any time – should you need the cash flow for an unexpected event. The longer you invest, the higher the return on your investment and the bigger the tax saving you get.

Get matched with the right financial planner

We know it’s as important to choose the right financial partner as it is to choose any other partner in life. That’s why Sanlam is helping you to get matched with the right financial planner who not only understands your financial goals, but shares your personal interests too. He/she will help you plan for events that may derail your long-term financial plan, at a price you feel comfortable with.

Visit our Money Meetups page to find your perfect match, and to check out our video series which explores how different financial planners connect with clients and help them beat debt, unearth more money to save and start investing.

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