Before you cancel your insurance, consider the potential financial risks and the importance of reviewing your policies with a financial adviser.
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The rising cost of living and economic uncertainty are affecting many South Africans, cancelling their insurance policies appear to be a quick solution for cutting expenses.
However, cancelling your policies could leave you exposed to financial risks when you need the protection the most.
Therefore, reviewing your financial priorities becomes essential and your policies should be at the top of the list.
Stian de Witt, Executive Head of Financial Planning at NMG Benefits, advises individuals to collaborate with a financial adviser to identify their actual risks, comprehend the available options, and customise a solution that aligns with their budget while ensuring essential coverage.
Below are four questions you need to ask your financial adviser when reviewing and revising your policies:
You need to consider where you are most vulnerable to financial loss.
"Your risk of being unable to work due to illness or disability is probably higher than you think and is much higher than your risk of passing away prematurely," de Witt said.
During 2023, millennials (between the ages of 28-43) were 55 time more likely to claim their income protection benefits than their death benefits, according to de Witt.
This ratio was still high at 17 times more when looking at income protection versus death claims across all ages.
Whether you own a business or are self-employed, a listed salaried professional, independent contract worker, or commission earner, the seven-day waiting period on income protection could be the difference between stability and struggle.
Gig workers are also often under-insured so, if you are part of the gig economy, you should also take this into account.
According to de Witt, critical illnesses can often lead to additional expenses including dietary changes or ongoing medical treatments, and your current income protection may not provide sufficient cover.
Going forward, you need to ensure that your policy includes benefits that help you manage these extra costs.
While lump sum payouts can be useful for settling debts, they may not be enough financial support for your family following your death.
A life income benefit can offer a monthly income for your dependents, to protect their financial future after you are gone, therefore your specific needs and circumstances need to be assessed before you commit to a product.
For example, you might be that you prefer rental properties, then a lump sum benefit is better than someone who does not want to deal with tenants.
"An annual review of your policies gives you the chance to streamline your cover, ensuring it aligns with your current financial and risk situation. It can even result in monthly savings, which could help buffer other areas of your budget," de Witt said.
"When you have the right cover in place, you are not just protecting yourself. You are making the most of your available budget to safeguard your family’s future – the biggest investment you will ever make."
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