By: Hannah Myburgh
Insurance policies are typically renewed automatically each year, often without us realising. Failing to review your life cover at least annually can result in being either over-insured or under-insured. Beyond the annual review, it’s important to reassess your life cover at major life milestones or significant changes. Remember, premiums are based on factors like age, occupation, health history, and smoker status—changes to any of these can impact your premium and underwriting. Consider reviewing your life cover if any of the following occur:
Change in smoker status: It is essential to inform your insurer of any change in your smoker status. If you initially applied for cover as a non-smoker but later started smoking, some insurers may require you to disclose this change, as it could affect your premium and benefit. Failing to do so may result in a reduced or declined claim. Conversely, if you were underwritten as a smoker and have quit for at least a year, your insurer may lower your premiums based on your updated status. Always ensure your insurer is aware of these changes to avoid complications.
Change in occupation: Your occupation plays a significant role in the underwriting process and directly impacts your premiums. Factors such as where you work, how much you travel, and the physical demands of your job are considered. If you initially took out a policy as a desk-bound accountant and later changed careers to a garden landscaper, it’s crucial to inform your insurer of this change.
Travel outside borders of South Africa: If your new job involves frequent travel outside South Africa, especially to high-risk countries, it’s important to inform your insurer. Depending on the frequency and destinations of your travels, your insurer may adjust your premiums or apply exclusions to your policy. Keep them updated to ensure adequate coverage while travelling.
Group life cover: When reviewing your personal life insurance, it’s important to consider any group life cover you may have through your employer. If you contribute to a pension fund, check whether group life cover is included, and verify if there’s a Free Cover Limit. This limit represents the amount of cover you qualify for without undergoing medical underwriting. Group life cover is typically more cost-effective than personal insurance, so if you need additional cover, it might make sense to increase your group cover before opting for more personal insurance. If you’ve recently joined a company offering life cover as a benefit, reassess your personal life insurance to avoid being over-insured. Should you leave an employer but still require life cover, inquire about a conversion option. This allows you to convert your group life cover into a personal policy with minimal medical underwriting, ensuring continuity of protection.
Debt: If you have paid off significant debt, it may be worth reviewing your life and capital disability cover. Often, part of this cover is designed to ensure that debt is settled in the event of death or disability. If the debt is now cleared, this cover may no longer be necessary. However, before cancelling, ensure that you fully assess your needs, as replacing this cover in the future may be challenging and costly.
Buying a house: If you’ve purchased a home using a home loan, the bank may require proof of sufficient life insurance to cover the bond in the event of your death. However, if the bank stipulates insurance as a condition for bond approval, you are not obligated to accept the bank’s offer. If your current cover is insufficient, consider increasing your existing life policy or taking out a new one to align with the value of your home loan and ensure adequate protection for your estate.
Divorce: Following a divorce, it is important to review both the amount of life cover and the nominated beneficiaries on your policy. If an ex-spouse remains the beneficiary, the insurer will pay the proceeds directly to them, bypassing your deceased estate. As a result, your financial dependants may have no legal claim to these funds.
* Myburgh CFP is a financial planner at Crue Invest (Pty) Ltd.
PERSONAL FINANCE