We are entering the second year of living with Covid. It has become second nature to wear a face mask whenever we go out and to constantly disinfect our hands.
100 years ago, South Africa experienced a similar crisis. This was the 1918 Spanish flu epidemic. Professor Howard Phillips from UCT, who wrote his PhD thesis on the 1918 flu epidemic, gave an interesting virtual talk during lockdown on the parallels between the flu and Covid. He mentioned two issues that are particularly relevant to us
Life Insurance
There was a boom in life assurance as a result of the 1918 flu epidemic.
It is no a coincidence that companies like Sanlam and Avbob were founded in 1918. The financial ruin that families faced because of the breadwinner dying, highlighted the importance of having protection.
We do not always appreciate what a vital role life insurance plays in protecting families from financial devastation. In 1918 there were very few options open to people. Now we are spoilt for choice. We need to use the many options open to us and get the necessary cover in place
Orphans
There was an unprecedented number of orphans created by the 1918 flu epidemic and there is a chance of this happening again.
The new strain of Covid certainly seems to be a lot more infectious than the original one. I have come across several cases where both the mother and the father have become ill. In most instances they get better but I have a couple of friends who did not survive.
As parents, we need to plan for the unthinkable. Our family’s future can be changed cataclysmically in a space of two weeks.
We need to be sensible and
- Update our wills
Make sure you have made provision for a trust for your minor children.
Get a financial adviser to run a dummy liquidation and distribution account. This is the account that your executor draws up when finalising your estate. This will highlight any unnecessary costs that the execution of your will would incur. After I went through this exercise, I restructured my will and saved my children R600 000 in unnecessary trust fees. (Hopefully the trust will never have to be set up).
- Identify guardians and trustees
We often put this off as we do not like to talk about death. Make that call and get the structures in place.
A nice touch is to document your thoughts and hopes for your children and keep it in a sealed envelope. This can be given to the guardians and trustees when the time comes for them to step into your shoes.
- Make sure that we have the right life insurances in place.
We need to ensure but there will be sufficient funds for our families to remain on the same financial trajectory as they are currently on. To do this we need to calculate 3 things:
- How much debt we have
- How much does it cost the family to live each month
- What funds we are going to need in the future to pay for items like University fees and weddings?
A Certified Financial Planner will be able to do these calculations for you and check that you have sufficient life insurance to meet these,
No one likes to think too hard about death. It is uncomfortable putting in structures like this. However, we do not have the luxury of procrastinating. Covid can strike quickly. We owe it to our loved ones to get these structures in place.
Kenny Meiring, CFP®, who holds an MBA, is an independent financial adviser
You can contact him on 082 856 0348
