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What to do when insurance becomes unaffordable

10 November 2020
4 minute read

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If you are struggling to pay your insurance premiums and cannot reduce any other expenses to free up funds, look at ways to reduce your premium rather than cancelling your cover completely. Here are a few ideas to make your long-term and short-term insurance premiums more affordable.

Long-term insurance
These are your life cover and funeral policies and any cover for critical illnesses and disability.

Reduce your cover
This is the easiest and quickest way to reduce your monthly premiums on a life cover policy. For example, reducing life cover from R1.15 million to R650 000 reduces the premium by nearly R100*.

Reducing cover for one member will reduce premiums on a funeral cover policy, although as premiums on these policies are relatively inexpensive, the saving may be small. However, if your funeral policy has several members, reducing the sum assured for all the members can make a difference. For example, a funeral policy with 3 members, each with a sum assured of R50 000, costs around R364 a month. Reduce the sum assured to R20 000 for all of them and the premium is just over R300 a month*.

Your family will appreciate an insurance pay-out

Although reducing your cover means you may not have as much life or funeral insurance as you would like, some cover is better than none. For example, a life insurance pay-out of R250 000 and funeral cover of R15 000 can make a big difference to your family if you pass away. Not being able to afford as much cover as you would like, or need, does not mean you should abandon insurance completely.

Top tip: 1Life Pure Life Cover policies have a guaranteed assurability benefit that allows you to increase your cover amount with no medicals every third policy anniversary or if you get married, have a child or buy a new home. So, if you do have to reduce your cover, you can consider increasing your sum assured when you are in better financial shape.

Stop smoking
Smokers pay more for insurance than non-smokers because of the health risks associated with smoking. If you can, or have already, quit smoking it could reduce your premium. The saving is quite significant. For example, a smoker will pay R984 for R1.15 million life cover whereas a non-smoker will pay only R620 a month*. Keep in mind that smoking includes vaping, so you need to quit all smoking products to be a non-smoker. 

*The premiums above are for a 1Life policy for a female non-smoker. They are for illustrative purposes only, premiums for individual policies will differ depending on sum assured, age, gender, occupation and state of health.

Short-term insurance
These policies cover your home, car and personal possessions.

Cover only essential items
You may have a policy that covers all the contents in your home, including all your personal possessions such as mobile phones, laptops, tablets and jewellery. You can choose to insure only essential items in your home and devices you use for work, for example, rather than every item and every device. This can save at least R100 a month, often a lot more.

Cover your car for fire, theft and third party only
When it comes to your car you can opt for covering fire, theft and third-party incidents only rather than comprehensive cover. This can reduce premiums significantly, but if you are in an accident you will have to pay to repair any damage to your own car.

Insure your car at market or trade value
This is lower than retail value and will reduce your premium.

Cover everything on one policy
It is usually cheaper to insure your car, household contents and personal possessions on one policy with one insurer.

Check for duplication
Your cellphone contract or car finance deal may already include insurance and your home loan may include building and household content insurance.  If you find you are doubly insured on any item, choose on which policy to insure and take it off the other.

Increase your excess
This is the portion of a claim you pay yourself, for instance, you might have a R1 000 excess on a windscreen repair claim. You would pay the first R1 000 of the bill, and the insurance company would pay thereafter. Increasing your excess will reduce your premium, but you will have to cover more of the repair or replacement cost yourself if something happens.

Install security
The more security features your home and car have the harder they will be to break into or steal, which means lower insurance premiums. Check with your insurer what security measures they recommend and how they will reduce premiums. Your insurer may also offer rebates at some suppliers to cover the costs of these.

Shop around
Take some time to shop around and see if you can get the same short-term or long-term cover for less with another provider.  However, you should be sure to compare policy benefits and features and not just monthly premiums! And don’t cancel a policy until you have been accepted for a new one.

Some cover is better than none
Affordability is a real concern for many people who want to insure their lives and protect their families, homes and possessions so they don’t face financial hardship if something happens. There are ways to reduce premiums and still keep some cover. Always look for options to make insurance cheaper and discuss these with your insurer or financial advisor before cancelling a policy.

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