While, as the name suggests, mortality benefits pay an amount should the person nominated as the life insured on the policy pass away, financial institutions typically offer various types of mortality benefit to address particular circumstances
The main purpose is typically to cover debt and make provision for dependents on the death of the insured life.
The following is an overview of the different mortality benefits offered a particular financial institution which demonstrates how you are able to tailor the cover you purchase to achieve your particular objective.
Death Benefit
- This is the pure form of a mortality benefit and provides a lump sum on the death of the insured life.
Modified Death Benefit
- Provides cover to insured lives with substandard health. The Modified Death Benefit caters specifically to those applicants who are declined cover under the Death Benefit for medical reasons. Eligibility is subject only to a negative HIV test result and financial underwriting
Unnatural Death Benefit
- Provides a lump sum on the unnatural death of the insured life, unnatural death being events such as an accident or a shooting. This benefit may be used to top up any existing life cover a client may have or it may provide cover in cases where the insured life has been declined cover for medical reasons.
Last Survivor Death Benefit
- Is the most cost-efficient way for the insured life to provide funds to cover estate duty. No one can avoid death and estate duty. Policyholders can however ensure the delay of estate duty, until the death of the surviving spouse, through careful estate planning.
- This is an appropriate benefit to use in conjunction with an estate planned in such a way the policy only pays out on the last survivor of two insured lives.
- The fact that this policy only pays out on the death of the last survivor of two insured lives makes this benefit a particularly cost-efficient / economical way of providing funds for estate duty.
- A built-in premium waiver means that after the death of the first insured life the surviving spouse/partner need not pay any further premiums for this benefit. This feature ensures that the premiums are paid and that the benefits protected.
Funeral Benefit
- Provides a cash amount, within one working day, on the death of a family member. This cash amount is for the payment of funeral costs and other immediate expenses. Family members, who may be covered, include two underwritten insured lives, their Provides a benefit amount that decreases in line with the need to pay for a child’s future education. The claim amount is calculated as the annual benefit amount chosen multiplied by the outstanding term of the benefit. Myriad has adopted this approach for the following simple reasons:
- The amount of money needed to pay for a child’s future education costs reduces as the child progresses through school or university; and
- It is difficult to address this need, for decreasing cover, with the current risk benefits available in the market.
Educational Protector
- Is a risk benefit the purpose of which is to provide funds to cover a child’s education costs in the event of the death, death or disability, death or functional impairment of the insured parent. However, the policy is not prescriptive in terms of how the money may be used.
Death Income Benefit
- This policy is different to the policies listed above as, instead of a lump sum, it pays a monthly amount for a specified period to nominated beneficiaries on the death of the insured life.
- This policy addresses the situation where a person’s bank accounts are frozen at their death which will restrict their dependent’s access and could cause financial hardship.
- The period specified should cover the time it will take for the deceased’s estate to be wound up.
Summary
The various types of policies described above confirm that mortality benefits are taken out with specific objectives in mind, and it is therefore important that the policy type will achieve this objective.
It is apparent that the traditional approach of merely taking put a death benefit for a certain amount may not be the most effective use of the options that are available.
