Discovery Life has launched its Global Education Protector insurance policy that could help cover your children’s education costs. Angelique Ruzicka takes a look at how it works
Education is expensive. Average tuition fees across public primary schools are at about R20 000 a year, while private schooling can cost about R100 000 a year.
And tuition fees at most expensive public and private high schools in South Africa can exceed a shocking R40 000 and R250 000 a year, respectively. Beyond that, university fees can set you back by between R45 000 locally and R370 000 internationally a year.
Given that education costs rise at a rate above inflation, for a child born today their matric year alone could cost at least R600 000 at the average private high school.
If your child intends to study all the way through to university, these figures are enough to give any parent sleepless nights. Many parents can’t afford such fees and if one or both parents were to die, chances are that their children’s guardians wouldn’t be able to afford these costs either.
Discovery Life has introduced the Global Education Protector as its answer to this dilemma.
If you or your spouse were to pass away, this product covers the actual costs of your children’s education from crèche through to their tertiary education.
What’s more, if you actively manage your health and wellness, Discovery Life will fund up to 100% of your child’s tertiary education through a University Funder Benefit – even if you don’t die or experience severe illness or disability by the time they reach that age.
HOW DOES IT WORK?
You can take out the Global Education Protector policy, which will pay your child’s education costs should you pass away or become disabled and unable to work.
This is an “indemnity insurance”, which means that it pays the education costs directly rather than a set lump sum as most life policies would.
Premiums start from a little as R125 a month and depend on the level of costs you wish to cover, whether it be public, private or international education costs.
In order to encourage customers to make positive behavioural lifestyle changes, Discovery uses its Vitality model with rewards as an incentive, which are paid directly into the fund for tertiary education.
There is no additional cost for this other than the monthly fee for Vitality membership.
You will start off with 10% funded up front into the University Funder Benefit and earn the rest through rewards and climbing up the Vitality status band. By reaching diamond status – achieved by reaching gold status three years in a row – and using the benefits, you could have up to 100% of your child’s university fees paid for.
Once your child matriculates and decides to attend a tertiary institution, the costs (or a percentage you have earned through Vitality rewards) will be covered until your child turns 24 or completes his/her first qualification, whether it’s a degree, diploma or trade certification.
IS THE PRODUCT RIGHT FOR ME?
If you’re not disciplined when it comes to eating healthily and exercising regularly, you won’t reach the higher rankings of your Vitality status. Therefore, you won’t be able to get 100% cover for your children when the time comes for them to study beyond high school.
You would still earn a percentage of the fees and can top up the policy’s payout with your own funds, however.
But if you’ve hit gold status with Vitality for a few years in a row and reached diamond status, then this product could be right for you.
Since the rewards accumulate each year, you would have to take out the policy before your child reaches the age of five and then maintain diamond status in order to have three years of tertiary education fully funded. You also need to keep the policy in force for the full period.
SAVING VS INSURANCE
South Africans are notoriously bad savers. At the end of the first quarter of 2017, the household savings ratio in the country was at -0.3% – up from -0.5% in the fourth quarter of 2016. According to surveys done, at least once this year, about 25% of households earning more than R40 000 a month and about 40% of households earning between R20 000 and R40 000 a month could not cover their monthly living costs with their salaries alone.
By exercising and eating well you can fund your child’s tertiary education without needing to save much for it. Savings put away for tertiary education often end up being used for other purposes. If you know you might dip into your savings, then consider a product like this, which in effect ring-fences the money for education. Another benefit of education cover is that it will go directly towards paying for your child’s school and university fees.
It’s not impossible for a child in South Africa to lose one or both parents. Discovery Life is currently paying for 4 000 such children. According to their statistics, a child has a 25% chance that a parent will experience an event claim before the child turns 18.
If you simply have a life policy, that money will be under the directorship of the trustees you’ve appointed and can be used for anything. If you have concerns about this, you can outline your wishes in your will or get a product like this that will be dedicated to your child’s future educational needs.