Cost effective and convenient are must haves for clients. No matter what they are buying, clients are looking for products, investments and services that meet their needs, are easy to manage and, critically important, cost effective. Long-term insurance policies that include different covers in one policy meet this need, saving clients money and time.
Shrinking wallets demand a focus on cost savings
Even wealthy South Africans are feeling the pinch in 2022. Costs are rising, from food to electricity, and education to travel. As a result, South Africans are looking to save on every expense that makes its way into the household budget, including long-term insurance. While the importance and need for insurance has never been more top of mind, the cash to pay for these, along with other essential products and services, is reducing. Affordable, cost-effective insurance is in high demand.
The simple way to meet this demand is to combine covers in one policy. This saves money as there is only one admin cost and related fees.
Policies that allow for multiple covers and benefits may also offer savings on premiums for additional covers. For example, a client who takes a 1Life Pure Life Plus policy with life cover and funeral cover, as well as dread disease and disability, can save 28% on their premium compared to taking multiple stand-alone policies.
Easy administration is a bonus
The added benefit for clients and advisers is that these policies are easier to apply for and administer. There is one form and one set of questions when applying. In the life of the policy, if contact or bank details need to change, or a beneficiary needs to be added, it is one change for the one policy, not multiple changes to different policies.
The need for long-term insurance
The obvious appeal of saving costs and time by taking a policy that includes a range of products is clear. However, clients may question how many different covers they need.
While the need for any insurance must always depend on the client’s circumstances and needs, there are three important considerations to take into account when considering long-term insurance.
Ready cash on hand to pay for ‘unexpected’ expenses is becoming harder to find
Emergency savings can go some way to funding the unexpected expense. However, research by FNB on their middle income customers (those earning R15 000 – R42 000 per month) found that 27% had no emergency savings and 56% had savings that were less than one-weeks pay. This would be inadequate for many emergencies, especially those long-term insurance caters for, such as a dread disease, disability, and even in some cases a funeral.
Emergency savings are one of the basic building blocks of a sound financial plan and should never be ignored. But insuring for the high unexpected events may be more cost effective and allow for emergency savings to be saved and used for other events such as unexpected repairs and maintenance to cars and homes.
Medical and life-changing events cost more than expected
Medical emergencies and life changing events, including a cancer diagnosis, heart attack and disability, can cost more than a few months’ salary and may not always be covered in full by medical aids or employment benefits. State aid is limited, and so many clients appreciate the need for cover for dread disease and disability. The catch is that they often believe these kinds of cover are expensive. Stand-alone policies can add significantly to the budget. However, the cost of one policy with multiple covers makes dread disease and disability insurance more reasonable and affordable.
Cremations and funerals are expensive
A benefit cover on many of these policies, including 1Life Pure Life Plus policies, is an accelerated funeral benefit for the life assured. This benefit pays an amount up to R50 000 to cover funeral and related expenses.
Funeral cover isn’t just intended to pay for an elaborate service, gathering and headstone for many guests. It also makes sure a respectable funeral or service can be held without any financial stress on relatives and loved ones.
The cost of a basic cremation starts at R15 000, and a funeral with just a modest service and coffin, restricted to family only, can cost more. These costs need to be paid soon after the deceased’s passing. Cash on hand can be used, as can a credit card. But this may not be ideal, or sufficient. Given the lack of savings, it could also be impossible. Another option is to claim these expenses from the estate. This can take time, especially if the estate is complicated and/or there are delays at the Master's Office.
Using funds from a funeral benefit cover makes more financial sense. And unlike estate funds, these payments are not taxed.
Combining cover makes financial sense and is more client friendly
Policies that combine benefits are an essential part of a financial plan. Importantly, they give advisers the opportunity to show how they can add real value to their clients by saving them time and money while meeting their needs.