FANEWS – Feature
In challenging economic times, we are all being more conscious of how we spend our money. Affordability is a key consideration when purchasing anything, but there is one area where you cannot compromise and that’s your life insurance.
Nic Smit, Chief Product Actuary at Bidvest Life, explains that while lower-priced policies may seem appealing when you are looking at life insurance offerings, they often come with limitations or exclusions that could leave you vulnerable when you need to claim.
“Life insurance is your way of providing financially for you and your loved ones, so it is important not to prioritise cost over quality,” Smit says.
Life insurance is an umbrella term for a portfolio of products that, on the one hand, protect policyholders against the loss of income due to illness, injury or permanent disability. On the other hand, life cover also pays out to nominated beneficiaries when the policyholder passes away.
“When you are thinking about life insurance policies, think about what you are buying. 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 claims stage,” says Smit.
Understanding the risks
As an example: According to Bidvest Life’s 2022 Claims Report, cancer was the fourth-most common reason for claiming on income protection, with breast cancer being the most prominent cancer claim for women (1).
The Independent Clinical Oncology Network in South Africa estimates that, depending on the type of cancer, treatment locally can cost anything between R10,000 and R1 million per patient, per year (2). Even if medical aid covers most of the cost of the treatment, there are significant out-of-pocket costs for cancer patients such as wigs, special dietary requirements, transportation to medical facilities, and mental health support. You also need to be able to take the time off to recover without having to worry about losing your income.
A comprehensive life insurance product portfolio that includes income protection, critical illness, disability and life cover ensures that you are protected from life’s curveballs and have claim certainty.
Paying more costs less
It is crucial to weigh up what you are sacrificing in order to pay a lower premium, and to consider whether the risk is worth it. Investing in a comprehensive policy may cost more now but can offer vital support when you need it most, Smit advises.
For example, a 30-year-old female teacher* who earns R30,000 monthly before tax chooses to insure 100% of her income with Temporary Income Protection (TIP) on a 7-day waiting period. Her TIP policy will pay out 100% of her salary if she is unable to work due to injury or illness. The monthly premium is R361.88.
• For an additional R182.42, she can add Extended Income Protection that will pay out 100% of her insured income until retirement in the event of a long-term injury or illness, even if she’s not permanently disabled.
• If she adds Critical Illness (CI) Income that boosts her TIP by paying out 130% of her insured monthly income for up to 12 months, her premium increases by just R92.45 per month.
• For an additional R88.10, she can add R1 million Life Lump Sum cover to provide her nominated beneficiaries with a lump sum payout to help settle any remaining debt or meet once-off expenses on her death.
Therefore, for an additional R363.78 per month, her financial health is protected if she is unable to work due to a short- or long-term injury or illness including a critical illness, and her family isn’t left with any debt on her 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,” says Smit.
References/Disclaimer
- Bidvest Life 2022 Claims Report
2. Independent Clinical Oncology Network
- Non-smoker. Ts & Cs apply
