Build the family’s funding plan

This calculator estimates life cover, not every insurance need

Life cover, also called death cover or term life insurance, pays an agreed amount when the insured person dies, subject to the policy. Its role is to provide money for beneficiaries or the estate at a time when debts, final costs and ongoing family expenses remain but the insured person’s financial contribution has stopped.

The calculator follows the needs approach described by the present-value needs method: immediate financial needs plus the present value of ongoing living and education costs, less assets that can genuinely fund those needs and existing life cover. A household with no financial dependants may have a small death-cover need but still need to consider disability or income interruption risks separately.

disability cover concerns total and permanent disability under the policy definition. Trauma cover responds to specified serious medical events. Income protection replaces part of income for an eligible period. Their definitions, benefit periods, waiting periods and interactions are different, so combining their sums insured with life cover would make the result misleading.

How future family costs become a lump-sum need

Ongoing living costs are not simply annual spending multiplied by years unless investment return and inflation are ignored. This calculator uses a growing-annuity present-value formula. The first year’s entered cost grows with the inflation assumption, while the lump sum is assumed to earn the entered net investment return after tax, fees and expenses.

When return and inflation differ, present value is the first annual payment divided by the return-minus-inflation difference, multiplied by one minus the ratio of one plus inflation to one plus return raised to the number of years. When the rates are equal, a mathematically equivalent limit is used. Zero years produces zero ongoing need.

Lower-needs sensitivity increases net return by one percentage point and reduces inflation by one point. Higher-needs sensitivity does the opposite. Both keep immediate needs and resource inputs unchanged. They are not forecasts; they show how small long-term assumption changes affect the cover gap.

Define immediate needs without double-counting

Mortgage strategy should be explicit. Some families intend to remain in the home and remove the debt. Others expect to sell, downsize or use another asset. Model the plan the dependants would realistically follow and include transaction, timing and housing consequences where material.

Debt balances change. Use current payout figures rather than original loan amounts, and review after refinancing or major repayments. A guarantor obligation, business debt or jointly held facility can require legal and financial advice about what survives death and who is liable.

Available assets are not all equally available

Savings and liquid investments may be accessible quickly, while investment property, private business interests, collectibles or a family home can take time to sell and may be central to the family’s ongoing plan. Asset values can fall, tax and transaction costs can reduce proceeds, and ownership or estate structures can control who receives them.

The resource-use percentage allows a haircut to the combined savings, entered retirement-fund death benefit and existing cover. A 75% setting means only three quarters is applied against needs. This is a scenario tool, not a legal determination. Avoid entering the same insured benefit both as existing life cover and inside a retirement-fund death-benefit amount.

Emergency savings may need to remain available for ordinary uncertainty rather than be fully consumed after a death. Likewise, retirement-fund death benefits can depend on the fund, nomination, recipient and tax law. Confirm the insured amount inside a retirement fund, account balance, beneficiary arrangements and likely accessibility.

Life cover and retirement-fund benefits need separate review

A South African retirement fund may provide an insured death benefit in addition to the member’s accumulated balance. The amount, eligibility conditions and cost depend on the fund and insured arrangement, so it should be verified from the current benefit statement rather than assumed.

A retirement-fund death benefit is distributed through the applicable fund process and is not necessarily paid according to a will or nomination alone. Timing, dependant investigations, beneficiary allocation and tax treatment can affect how much becomes practically available to the household.

Check the insured amount, exclusions, occupation or eligibility rules, beneficiary information and what happens when employment or fund membership changes. Do not cancel existing cover until any replacement policy is accepted and in force.

Why the premium field is an illustration, not a quote

Life insurance premiums depend on age, sex and permitted rating factors, smoking, health, occupation, pastimes, benefit amount, policy design, underwriting, stepped or level premium structure, loadings, discounts and insurer terms. A single national cost per R1,000 cannot represent those facts.

Enter a rate derived from a real quote if you want to translate the calculated cover gap into a rough annual cost. The page multiplies each R1,000 of additional cover by that rate and adds the entered annual policy fee. It does not model age-based premium increases, indexation, premium frequency loadings or changes after underwriting.

Compare policy definitions and exclusions as well as price. A cheaper premium is not equivalent if cover ends earlier, definitions differ, benefits interact or an application disclosure is incomplete. Read the product disclosure statement and insurer communications.

Worked household example

Suppose the plan includes a R400,000 mortgage, R30,000 of other debts, R15,000 of final costs and R20,000 of other immediate needs. Immediate needs total R465,000. The household also wants R50,000 a year of living support for 15 years and R12,000 a year of education support for 10 years.

At 2.5% cost inflation and a 3% net investment return, those future streams have a substantial present value because the real return is only slightly positive. The page adds them to immediate needs, then subtracts R100,000 of savings and investments, a R150,000 entered retirement-fund death benefit and R200,000 of existing outside cover.

The remaining gap is the additional cover scenario. At an entered R1.20 annual premium per R1,000 plus a R120 annual policy fee, the cost output is only an arithmetic illustration. A real insurer can quote more, less or decline or modify cover after underwriting.

Review cover when the plan changes

Recalculate after buying or selling a home, having a child, separation, a partner changing work, a large debt change, business ownership, an inheritance, a major asset sale, or a change to insurance inside a retirement fund. Also review beneficiaries and estate documents after relationship changes.

Compare the needs result with affordability. If the calculated amount is not affordable, do not silently delete essential needs. Prioritise them, test different support periods and seek licensed advice about policy structure. Partial cover can still be useful when the gap and compromise are understood.

Keep the calculation date, source balances, assumptions and policy documents. Tell trusted family members where policy and adviser details are stored, without exposing sensitive information insecurely.