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What happens to my 1Life policy when I retire?

Posted  March 11, 2019

Life expectancy increased by nearly ten years in the last decade, so many more of us will retire and live longer in retirement. But what happens to your life insurance? We take a look.

When you’ve spent five, sometimes six days a week at work for more than 40 years, retirement is a very big life change. Balancing a budget in retirement often requires a relook at your income and expenses, and one of the things you’ll need to examine are your long-term insurance policies.

The need for insurance can change in retirement but it doesn’t go away, so it is important to keep paying your premiums to keep your cover in place. Below we look at life and funeral cover, capital disability, expense protector and dread disease policies to see how they are affected when the life assured retires.

Life insuranceLife cover remains in place in retirement as long as you keep paying your premiums. 1Life policyholders cannot take out cover after the age of 64, but once you have cover it remains in place until you pass on and the death claim is paid.

Life insurance can make sure the care and assistance grandparents provide continues

Most of us take out life cover to make sure our loved ones don’t suffer financial hardship if we are no longer around to provide for them. Your children may no longer rely on you when you retire, but your spouse may and you might care for extended family members and friends. Many grandparents care for their grandchildren and a pay-out from a life insurance policy could fund these costs, or pay for education or a home if you pass away. And as life insurance pay-outs to beneficiaries don’t form part of an estate your dependants won’t have to wait for the estate to be wound up to receive the money.

A life insurance policy pay-out is also a great way to leave a legacy for your loved ones that you can’t always do with accumulated retirement funds. Unfortunately, the money we save for retirement isn't always as much as we would like and these savings have to last us longer (more years) because we are living longer. So there is a danger that we may outlive our retirement funds and won't be able to leave our family a legacy with these funds. An insurance policy, however, can ensure you leave a legacy because the pay-out will go directly to your beneficiaries. 

1Life life cover also has a terminal illness benefit that pays out the sum assured if you are diagnosed with a terminal illness and have less than 12 months to live. This could be used to make the last months and weeks of your life more comfortable and pay for expert palliative care.

There aren’t any pensioner discounts on life insurance premiums, so if you find that the premium stretches your budget too much you can chat to us about how to reduce it while still keeping some cover in place.

Funeral coverAs the name suggests, funeral cover pays a certain amount for funeral expenses and the policy remains in place until the principal member passes on or a continuation option is taken (where a member elects to continue the policy and becomes the principal member).

You cannot take out funeral cover once you have reached the age of 65, so it is important to take this cover before you reach this age and keep it in place when you retire because you may not be able to buy a policy when you are over this age.

Disability cover and income protectionOccupation-based disability insurance is meant to replace your salary when you cannot earn because of a disability. Because you are no longer working when you retire, occupation-based disability insurance falls away.

At 1Life we reduce your sum assured in increments over the five years before you reach your retirement age until it reaches zero. The retirement age is either 65, or earlier if you have selected a younger age on your policy. You can find this information on your policy schedule.

Here’s how the sum assured for disability insurance reduces if you have cover for R500 000 and select age 65 as your retirement age:

AgeDisability cover

60

R500 000

61

R400 000

62

R300 000

63

R200 000

64

R100 000

65

R0

The 1Life Expense Protector product is used for income protection and works in a similar way to occupation-based disability insurance and the sum assured reduces to zero in the five years leading up to retirement.

Event-based disability is different to occupation-based disability in that claims are paid when a certain event happens, such as you lose a limb. Event-based disability doesn’t end when you retire and will continue either to death or when the full sum assured has been paid for claims. You can only take this cover out up to age 59. Because we all, at any age, can become an accident victim or suffer a traumatic injury, the need for this insurance remains when we retire.

Dread disease coverDread disease cover is for life and falls away either when you pass away or the benefits are paid in a claim.

Dread disease cover covers serious illnesses and conditions such as cancer, and can be used to pay for the extra healthcare expenses associated with these illnesses.

Unfortunately medical expenses usually increase as we get older, so a little extra can go a long way. While some care is provided to pensioners at state hospitals at a low or minimal cost, there may be treatments not available at state facilities. And if you have medical aid, not all the costs of treatment may be covered in full. A dread disease policy could fund these costs.

Top tip: Tell us if your details change when you retire such as a new address or contact details so we can keep in touch.

You might not be working in retirement but your insurance isYour insurance doesn’t stop working for you when you stop working, and will still pay valid claims. Retirement can be an exciting time, but it requires careful financial planning. Don’t ignore your long term insurance when you plan – it could make all the difference to your final years and your loved ones.

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