In challenging economic times, consumers are scrutinising their spending more closely. While affordability is a key consideration, there’s one area where cost-cutting should not come at the expense of quality: life insurance.
Nic Smit, chief product actuary at Bidvest Life, cautions against being swayed by the allure of lower-priced life insurance policies. “Life insurance is your way of providing financially for you and your loved ones, so it is important not to prioritise cost over quality,” he says.
According to Smit, life insurance encompasses a range of products designed to protect policyholders from financial hardships. These include income protection in cases of illness, injury, or disability, as well as payouts to beneficiaries upon the policyholder’s death.
“When you are thinking about life insurance policies, think about what you are buying,” Smit advises. “When the time comes to claim, there is a very real reason why you have these policies in place. Make sure that you know your real needs and risks, and are covered correctly so that there is no disappointment at the claims stage.”
Smit says the risks of inadequate cover are stark. Bidvest Life’s 2022 Claims Report highlights that cancer was the fourth-most common reason for income protection claims, with breast cancer topping the list for women.
He says the Independent Clinical Oncology Network in South Africa estimates that local cancer treatment costs range from R10,000 to R1 million per patient annually. Even with medical aid, out-of-pocket expenses like transportation, dietary requirements, mental health support, and recovery time can add up significantly.
A comprehensive life insurance portfolio that includes income protection, critical illness, disability, and life cover can shield policyholders from these financial burdens, providing much-needed certainty at the claims stage, according to Smit.
Smit emphasises the importance of evaluating the sacrifices made to secure lower premiums. “Investing in a comprehensive policy may cost more now but can offer vital support when you need it most,” he says.
Smit says for example, a 30-year-old female teacher earning R30,000 monthly before tax can fully protect her income for a relatively modest increase in her premium:
- Temporary Income Protection (TIP): For R361.88 per month, her TIP policy pays out 100% of her salary if she cannot work due to illness or injury.
- Extended Income Protection: For an additional R182.42, this extends her cover to pay 100% of her salary until retirement in the event of long-term injury or illness.
- Critical Illness (CI) Income: For R92.45 more, this boosts her TIP, paying 130% of her insured income for up to 12 months during a critical illness.
- Life Lump Sum Cover: For R88.10, she can add R1 million in life cover to protect her family from debt or unexpected costs upon her death.
- Altogether, for an additional R363.78 per month, her financial well-being is safeguarded in the face of short- or long-term challenges, critical illnesses, and eventualities such as death.
“Talk through your needs with your financial adviser and make sure you plan accordingly, because you can’t afford to compromise on your life insurance cover,” Smit says.
PERSONAL FINANCE