In a recent survey by the Financial Sector Conduct Authority, it was revealed that only 10% of South Africans currently have life insurance. Research conducted by Hollard Life Solutions has identified that, despite the significant financial benefits offered by life cover, many South African consumers are underinsured, due to various reasons, such as cost concerns, lack of long-term planning, economic uncertainties, and a general mistrust of insurance providers.
The research further reveals that there are several misconceptions surrounding life cover. A common one is that life insurance is solely a safeguard for death, overlooking its broader scope in covering life-altering events such as critical illness and disability. There is also a popular misconception that life insurance is only for the wealthy who have assets to safeguard.
Shedding light on some of the concerns and misconceptions around life cover, to show the pivotal role of broad life cover in securing financial stability, Vhutshilo Nesamari, Hollard Life Solutions' senior customer manager says, “The reality for many South Africans is that the idea of life cover remains entangled with reluctance and is often perceived as a grudge purchase despite the undeniable financial benefits that come with a comprehensive policy.”
She explains that contrary to popular belief, life insurance goes beyond death coverage, extending to critical illness and disability. The financial safety net provided by life cover becomes crucial during times of crisis, offering peace of mind to families facing economic uncertainty.
In the first half of 2023, policyholders and beneficiaries received a substantial R287.1 billion in claims and benefits, as reported by the Association for Savings and Investment South Africa (ASISA). This highlights the tangible support provided by life cover during times of crisis.
Nesamari emphasises the need for South Africans to recognise life cover as a crucial financial safety net in times of crisis.
“Economic uncertainties further highlight the importance of ensuring adequate financial resources for families facing the loss of a breadwinner. Life insurance, in this context, can serve as a safety net, offering reassurance in a difficult financial position,” she says.
She highlights that the impact of the Covid-19 pandemic has been a stark teacher, imparting valuable lessons about the genuine value of having cover in place. The benefits of life cover become most evident during times of crisis, illuminating its role as a protector in unforeseen circumstances.
Having a concrete plan for potential life-changing events allows consumers to protect their families in the long term. Nesamari notes that life cover ensures that dependents can afford the life envisioned for them, even in challenging circumstances. The benefits of life cover become most evident during times of crisis, establishing its role as a protector in unforeseen situations.
Dispelling common myths surrounding life cover is crucial to encouraging its adoption. One prevalent misconception is that life cover is an expensive product reserved for the wealthy.
Nemasari says that this misconception makes consumers shy away from life cover. However, life cover products are designed for a diverse base of consumers to meet different needs and affordability. Premiums are structured to consider several factors including age, education, income, lifestyle habits like smoker status, and responses to a set of medical questions. All of those contribute to the calculation of the total premium contribution.
A prevalent myth is that life cover is an expensive product reserved for the wealthy. Nesamari says that life cover products are designed for a diverse consumer base, considering factors such as age, education, income, lifestyle, and health. Premiums are structured accordingly to meet different needs and affordability levels.
Another misconception is that life insurance only pays out on the death of the policy owner. Nesamari emphasises that life policies serve as versatile risk management tools, covering critical illness and disability. In the event of these life-altering events, life policies provide a financial buffer, ensuring policyholders can continue to earn an income and support their dependants.
In addition, a life policy extends financial support to dependants and beneficiaries when a breadwinner is no longer present. This financial support can be utilised to settle remaining debts such as home loans or car finance, invest in the education of young children, or contribute to retirement planning.
Contrary to the belief that young people do not need life cover, Nesamari highlights that the optimal time to get life cover is when you are young. Premiums are more affordable, and health considerations are minimal. Purchasing life cover at a young age ensures cost-effectiveness and guarantees coverage when required.
While there may be misconceptions surrounding life cover, it is crucial for South Africans to recognise its true value. Life insurance goes beyond death coverage, providing a comprehensive safety net for families during times of crisis. Dispelling these myths is essential to encouraging the adoption of life cover, ensuring a secure financial future for all members of society.
PERSONAL FINANCE