During the course of a contract, premiums increase. This is commonly referred to as premium escalation and is done to take aging into account. 60 might be the new 40, but our bodies age, and as we get older, a person is more likely to claim on their insurance policy. This is why premiums are lower at the start of a policy, and increase as we age.
Certainty, affordability and simplicity are the hallmarks of a 1Life insurance policy. When you invest in 1Life insurance, you know exactly what your premiums will be for the next five years. No surprises!
We’ve kept the terms and conditions as simple as possible, but as in any contract, a detailed explanation of the terms used makes them easier to understand. Here’s what you need to know.
Premium guarantee and increase
Life, dread & disability cover: 1Life protects policyholders from variable premium increases by including a premium guarantee period on life cover, disability cover, dread disease cover and 1Life All Woman female dread disease policies.
What this means:
- In the first two years of the policy your premiums will not increase.
- For the next three years your premiums increase by a set percentage, which is 5%.
To illustrate we’ve used a life policy with R500 000 life cover, and a starting premium of R200.
In the first two years the premium is level with no increases.
| Year | Life cover | Premium |
|---|---|---|
| 1 | R500 000 | R200 |
| 2 | R500 000 |
R200 |
From year 3 to year 5, a 5% annual increase applies.
| Year | Life cover | Premium |
|---|---|---|
| 3 | R500 000 | R210 (R200 + 5% increase) |
| 4 | R500 000 | R220.50 (R210 + 5% increase) |
| 5 | R500 000 | R231.53 (R220.50 +5% increase) |
Funeral policies have a level premium for whole of life – so if your starting premium is R100, this remains the premium as long as the policy is active, or you change your cover amount, which you can do at any time.
What happens after the first 5 years?
Every five years we may review the premium increase - currently 5%, to make sure that we are offering affordable cover and will be able to meet all future claims. So, at the end of the first 5 years, the percentage by which your premium increases every year will be reviewed and the percentage increase set for the next five years. In year 10, there will be another review.
A review is necessary because life can be unpredictable. Our policies allow for a maximum 15% policy increase, although we need to emphasise that this is unlikely - in all our reviews to date, we have never had to increase premiums by more than 5% every year.
Your cover however does not increase when your premium increases - 1Life policies have level cover. This gives you certainty in that you know how much you are covered for.
You also need to know...
- Your premium will increase on the anniversary of the policy – this is the date on which the policy commenced and the date from which you are covered.
- Check your policy to see when and by how much your premiums increase.
- 1Life will notify you before your policy anniversary to let you know of any changes to your premium and any benefits you may want to apply for.
- When your premium does increase and you have a debit order, make sure there are sufficient funds to cover the increased amount.
Premiums increase when cover increases
It is a good idea to take more cover when there’s a significant change in your life circumstances - maybe you are getting married, or having a baby or buying a house. Your premiums are calculated on the sum assured amount and your personal details, so if your cover increases your premium will increase.
Remember that you can increase your sum assured on life, disability and dread disease policies with our guaranteed assurability benefit. That means that every three years, you can increase your cover by up to 25% of the original sum assured without undergoing further medical underwriting. In our example of a R500 000 life policy, you could increase cover by R125 000 with no medical tests after three years. If you want to increase your cover by a higher amount, 1Life may ask for medical tests.
What to do: Go through your policy schedule to see when you can apply for more cover should you need to without undergoing medical underwriting.
The bottom line
When you take out a policy with 1Life, we do everything possible to make sure you know exactly what you’ll be paying, and when. That means more predictable financial planning for you.
