ADVERTORIAL

2018-07-12 06:01

By Juggie Govender of East Coast Financial Services (Pty) Ltd – FSP 44760

WITH fuel price and VAT increases adding to the pressure on household budgets, you may be tempted to ditch some insurance cover.

But allowing policies to lapse by not paying the premiums - without reviewing whether it’s necessary cover or not - exposes you to a potential financial disaster.

Insurers suggest you find other ways of reducing your costs.

Consumers often think that they are not getting any immediate value from a life assurance policy and that they can cancel a policy now and start it again later when they are more cash flush.

They forget that later the premiums may cost more because you are older and potentially a higher risk to the assurer or, if you have developed health problems, you may even be uninsurable.

Often people choose to cancel their insurance when they are looking for ways to cut down their monthly costs because insurance is seen as a grudge purchase.

You could check if you still need to have as much cover as you have, especially if you have paid off debt or if the support you need for dependants has reduced since you took out your cover.

If you are paying premium loadings for health conditions or smoking, you can have these reviewed if your health has improved or you have stopped smoking.

You should not confuse the relatively small increase from the additional percentage point on the VAT rate with annual premium increases. Premiums may increase by more than inflation if your premiums are linked to your age and hence your risk.

Some life policies have aggressive age-related increases. Sometimes it is useful to set premiums higher initially and ensure increases are sustainable.

Consumers should understand fully how the various premium patterns work; cheapest is not always the best option.

If you are struggling to make your monthly insurance payments, you should speak to your insurance advisor or broker rather than let the policy lapse.

What seems like a solution to a problem when you decide to cancel insurance cover can be a huge mistake.

It is not uncommon for those with previously insured lives to die or suffer a disability shortly after cancelling a policy.

You are more likely to think twice about cancelling savings policies if you have set a savings goal.

You can reduce the level of cover or remove some of the non-essential add-on benefits to balance your budget if you need to.

Life is uncertain and it is impossible to predict when a life-changing event will impact you and your family. Rather than cancelling the protection offered by life assurance, you should review your budget and consider cutting back on “luxuries” until your financial situation improves.

The reality is that very few of us would be able to replace any of our high-net-worth assets, for example cars, your ability to earn an income, or furniture without having to dip into our savings, or worse, getting into debt.

It is therefore critical that as one of your financial planning activities, you should ensure that you are adequately covered and this should be a priority.

You pick some luxury costs you can either cut out completely for a while - for example, buying new clothes for the rest of the year - or which you can reduce - for example, one cup of coffee a day instead of three, or carpooling instead of driving alone.

It’s advisable for consumers to review their financial planning on an annual basis to make sure that they are properly covered or are not over insured.

This article, is an excerpt from Business Money by Laura Du Preez and Angelique Arde

You could contact me on 083 399 3905, my office on 032-944 3051 or e-mail me on juggieg@telkomsa.net for an appointment or further information and any other financial advice.

Disclaimer

The information is only intended to be of a general nature and should not be relied upon by any part without obtaining full details from a licenced financial service provider.

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