Life cover query

(Shutterstock)
(Shutterstock)
A Fin24 user is not sure whether he should reduce his life insurance after his circumstances have changed. He writes:

I have a R3m life insurance policy on myself and one of R2.5m on my wife.

We recently increased the amount to ensure cover for the two bonds we had on two properties we owned.

We have sold one of the properties, and so the exposure is reduced by over R1m.

Does it make sense to reduce the life insurance accordingly?

I am hoping to save some money on a monthly basis, but am not sure about things like penalties.

I am also not sure whether the life insurer will increase it again later without loading further penalties.

Marius Fenwick, chief operating officer of Mazars Financial Services, responds:

Life assurance must be need-specific.

If you have sufficient life cover to cover debt and provide enough liquidity in your estate, then the life cover should be reduced.

The saving in premium must then be invested to increase your future investment capital.

If you are unsure about your life cover requirements, you should consult a financial adviser to determine your needs.

There shouldn't be any penalties when the life cover is reduced.

However, should you have any medical ailments that may lead to future insurability issues, I would suggest that you retain the current cover.

- Fin24

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