According to the FinScope South Africa 2015 Consumer Survey only 18.5 million South Africans are insured and only 6.6 million have non-funeral insurance. Perhaps even more alarming, 13.7 million people have considered cancelling their insurance/investment policies during the year in order to pay back money they had borrowed. This is a rise from 6% in 2014.
The survey also reveals that even more South Africans are struggling financially – for example, 28% reported problems making ends meet in 2015 as opposed to 24% in 2014. When times are tough, the normal reaction is to cut costs, and many families see insurance as a non-essential item that can easily be trimmed out of the budget. Find out why you should prioritise your life insurance and what you can do to hold on to the cover your family needs.
The cost of cancelling cover
70% of South Africans desire greater financial security and life insurance plays a central role in providing families with that security. Your life insurance policy is the financial protection your family needs in the event of your death, providing them with the money to support the family without your income, which means covering schooling and medical bills and paying back your accumulated debt. If you are struggling to make ends meet now, take a moment to think about how your family would cope without your salary? There are, however, other considerations when considering cancelling your cover.
While everything gets more expensive each year, in the case of life insurance it is important to remember that certain life events, such as ill health or a new job, might make it difficult to get cover for the same premium when you try to renew your policy after you have cancelled it. Furthermore, should you fall ill after you cancel your cover, you may also not be able to buy cover at all and be excluded completely due to certain medical conditions.
Prioritising your cover
You understand in principle why it is not a good idea to cancel your cover, but what can you do to make your life insurance premiums more manageable? We have the following advice:
- Obtain quotes from a range of providers. Can you secure the cover you need at a better price? Remember to compare benefits and policy terms & conditions, for example premium increases and waiting periods, and not just premiums.
- Speak to our client services team about tailoring your policy to suit your budget without compromising on the cover your family needs.
- Keep your life insurance premiums as low as possible. Did you know that your personal health will impact your premiums and that a clean bill of health and a healthy lifestyle will all add up to lower life insurance premiums? Monitor your BMI, quit smoking and drink in moderation and you could pay less for your cover.
- Take a long, hard look at your list of monthly expenses and prioritise them in order of importance. Cut those items that your family can live without. Follow 1Life on Facebook and read our blog for regular advice on budgeting and saving, like this article on how to draw up a savings plan or these great savings tips.
Insurance should be one of those non-negotiable expenses in your monthly budget, along with rent/bond, school fees and vehicle repayments. Don’t be tempted to cancel your insurance when budgets are stretched.