It is time to increase your sum assured? Let’s take a closer look.
It’s a good idea to review your insurance at least once a year, or when a major change, like having a child, happens in your life.. Life and disability insurance are meant to replace an income, so if your income and/or expenses go up, you might need to increase your cover amount. This is what you need to know:
Before you review any lifestyle changes, take a look at your policy to see how much cover you already have. You will find this amount in your 1Life Policy Schedule in the Policy Benefit table next to Sum Assured. This is the amount that will be paid to your beneficiaries in the event of a death claim, or to yourself if you have a disability claim.
If any of the below changes have taken place in your life, you need to review your sum assured to make sure it will cover your family’s expenses if you are no longer around or able to earn an income due to disability.
Your income increases
A higher salary or inheritance, (or a win in the lottery!), often means we spend more – perhaps it’s a more expensive car, or a home in an upmarket suburb, or a new school. This may increase your monthly expenses such as insurance, school fees or loan repayments.
Your family changes
Over time many of us become part of new families when we marry, grow our families when we have children, get divorced or start caring for extended family members. If there are more people dependent on your income than when you first took out insurance, you may need to increase your cover amount.
Changes to your family can include:
- Having a child – which may mean more funds are needed for care and education.
- Marrying or moving in with your partner – if your income is used to care for your loved one, your cover may need to increase.
- Caring for an extended family member or friend – perhaps you support an elderly parent or younger sibling. Check that you would still be able to do this in the event of death or disability.
- Disability – caring for a family member who is disabled can change your life insurance needs dramatically. They may need a caregiver, for example, a cost you would need to provide for in a life insurance policy.
- Divorce – not only is divorce extremely stressful, it can mean additional demands on your income. A divorce agreement may stipulate that you need to provide for your children’s education, living expenses or other care. If your current life insurance cover is not sufficient you may need to increase your sum assured to meet these needs.
- Death of a partner – when a partner dies there are often more obligations placed on the income earner in the home. You may find the extra work your spouse did now needs to be paid for – such as caring for a relative, or transport for your children and care in the afternoons. These extra demands on your income mean you may need to increase your sum assured so they would be met if you are no longer around.
Inflation - your costs increase
If your cost of living has increased due to inflation, your sum assured may not be enough to cover all your expenses.
Inflation in South Africa in 2018 was around 5%. This is a general figure so your costs may have increased by more or less than this percentage. If inflation was 5% each year for the past five years, for example, your sum assured of R1 million would need to have increased to R1,2 million to cover your expenses in five years. For a sum assured of R2 million the amount of cover needed to keep up with inflation in five years would be R2,4 million.
Your debt increases
Your family will also need to use your life insurance pay-out to pay off your debt. For example, if your family is living in a home and there is a home loan, paying off that loan with some of the insurance money means they have a debt free asset and a place to live if something were to happen to you. If your debt increases your sum assured may also need to increase.
Take a look at your long-term debt such as a home loan or car loan and short-term debt such as store cards and see if these are higher than when you first took out your cover, and if your sum assured would be enough to cover these costs.
Increasing your cover is easy! You can either call 1Life today and talk to our consultants or take advantage of our Guaranteed Assurability benefit on your policy that allows you to increase your cover up to a certain amount, without medical underwriting every three years or when a major life event happens.
While increasing your cover will mean an increase in your premium, the increase may not be as high as you think. And remember that your insurance is there to take care of your family when you cannot – so the increased premium will be worth it in the long run.