Discovery Life has launched a Global Education Protector policy which could help fund your children’s education costs.
Education is expensive. Currently, average tuition fees across public primary schools sits at around R20,000 per annum while the private schooling can cost around R100,000 a year. Frighteningly, the tuition fees at the most expensive public and private high schools in South Africa exceed R40,000 and R250,000 per annum respectively.
Beyond that, university fees can set you back by between R45,000 (local) and R370,000 (global) per year. Given that education costs rise at a rate above inflation, for a child born today, their final year of schooling will cost around R600 000 alone at an 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 won’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 die, 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 have not experienced a life-changing event like death or severe illness.
How does it work?
You take out the Global Education Protector 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 it pays the education costs directly rather than a set lump sum as a normal life policy would. Premiums start from as little as R125 per month and depend on the level of education costs you wish to cover – public, private or international.
In order to encourage customers to make positive behavioral lifestyle changes (dietary as well as exercise), through its Vitality model it will incentivise with rewards which are paid directly into the education fund for tertiary education. There is no additional cost for this except for the cost to be a Vitality member.
You start off with having 10% funded upfront into the University Funder Benefit but you 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 achieved through 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 right and exercising regularly, you won’t achieve the higher rankings of your Vitality status and will therefore not enjoy 100% cover for your children when it comes time for them to study beyond high school, although you would still earn a percentage of the fees and would top up the policy’s payout with your own funds.
If, however, you are able to meet the requirements to achieve Gold status on the Vitality programme, and then maintain that for three years to get to Diamond, then this product could be right for you. As the rewards accumulate each year, you would have to take out the policy before your child reaches the age of five and 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 South Africa stood at -0.3% up from -0.5% in the fourth quarter of 2016. According to surveys done, around 25% of households earning more than R40,000 per month and around 40% of households earning between R20,000 and R40,000 per month could not cover their monthly living costs with their salaries alone at least once this year.
By exercising and eating well you can fund your child’s tertiary education without having to save. The other advantage is that often savings put away for tertiary education gets used for other purposes. If you know you may dip into any savings fund, then consider a product such as this which effectively ring-fences the money for education.
The benefit of education cover is that it will go directly towards paying for your child’s school and university fees – it won’t be used by anything or anyone else. While it’s not something that you’d like to think about, it’s possible that your child could lose one or both parents. Discovery Life is currently already paying for 4,000 children who have lost parents. According to their statistics, there’s 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, it’s best to outline your wishes clearly in your will or to get a product like this that will be dedicated to your child’s future educational needs.
This article first appeared in City Press.