People are living longer. While that’s a good ‘problem’ to have, it can become a real problem for people who haven’t planned for quality-of-life living in their later years, when their health may worsen and disabilities could become a real threat.
In more developed countries, people can live for 20 years after retirement, but in South Africa our average life expectancy is only now beginning to creep up to actual retirement age.
Here’s some global and local statistics: The United Nations (UN) has estimated that, on average, a person born in 1950 would have lived for 47 years to 1997. In contrast, someone born today is expected to live to approximately 70 years of age, and someone born in 2050 will live to 76. That is globally.
In South Africa, life expectancy is improving even faster than the rest of the world, much of this improvement being driven by the progress in treating HIV. Earlier this year, The South African Medical Research Council (SAMRC) released its latest report showing South Africa’s life expectancy has improved to 62 years in 2013 – an increase of 8.5 years since the low in 2005. That’s an increase of more than one year ‘of life’ every year!
However, living longer does not necessarily mean living healthier, and people who have not planned for possible health problems in their late 50s and early 60s may find those years less comfortable than hoped for, unless they take out appropriate disability and dread disease policies.
‘Life expectancy’ is defined as the remaining number of years a person is expected to live. In South Africa, life expectancies vary between socio-economic groups and as a result life insurance companies do not simply look at national average life expectancy but look much more closely at your individual circumstances.
The most important factors that can influence your life expectancy are:
- When you were born
- Your gender
- Your race
- Personal medical conditions
- Family medical history
Make no mistake, there is a direct link between how many more years you may on average expect to live and how much you will pay in premiums for a life or disability policy. It is the single most important factor that insurance companies look at to determine what life insurance premium you will pay. Therefore, the earlier you take out a policy (so the more years you have until a potential claim) the cheaper your policy will be.
This is because more years to live means a lower risk to the life insurance company because you are less likely to die or become disabled any time soon, which would then require a pay-out of the full or partial benefit of your policy before you have paid much into the policy. The longer you wait to purchase life insurance, the lower your life expectancy and that means a higher risk for the life insurance company. The life insurance company in turn will want to reduce its risk by charging you a higher premium.
Another factor to bear in mind is that pre-existing conditions will be excluded from your policy. With age, health problems worsen, sometimes considerably so. If you leave it too late in life before taking out a policy, you may have become uninsurable or lose out on cover for certain health problems.
The principle of life expectancy suggests that you should purchase a life insurance policy for yourself and your spouse sooner rather than later as you will save money through lower premiums, and of course have the benefit of cover throughout your (long) life.