“Many South Africans have to adjust to doing more with less because of rising interest rates, fuel, and electricity and food prices. Since January this year, the South Africa Reserve Bank (SARB) has raised interest rates by a combined total of 75 basis points,” stated CEO of FNB (First National Bank) Life, Lee Bromfield.
This, in addition to stiff inflation that is still on the rise, and tariff increases that have affected staples like milk, bread, electricity and fuel, consumers are starting feeling the pinch.
It is in these tough times that consumers tend to cut back on important expenses like insurance cover, to alleviate financial pressure, marked Bromfield. This however, only places even greater pressure on people in the long run and exposes them to greater financial risk.
“It is not ideal to stop paying your life or funeral cover premiums because you could lose all your benefits, with no refund of the premiums you have been paying since the beginning of your cover. Look at other options to help you save a bit more money to afford your premiums and other household necessities,” stated Bromfield.
Below are a few tips Bromfield suggested to better manage payment of your premiums:
-Small lifestyle changes: One could consider avoiding peak traffic or opting for most cost-effective ways to travel like making use of public transport. This could see you saving a great deal in terms of fuel expenses.
-Shop wisely: “Always pay attention to retail specials for household necessities such as food. Sometimes it is cheaper to buy certain goods in bulk to last you a few months,” Bromfield added.
-Make use of loyalty benefits: These days most retailers have implemented loyalty programmes. This has even extended to the banks, as they have taken to rewarding people for using their cards instead of cash.
“Familiarise yourself with how these programmes work to be able to save a bit more,” advised Bromfield.
-Limit your wastage: Playing open cards with your family and especially your kids is sometimes the best way to save. Instead of buying expensive toys and lunches and engaging in expensive activities, being transparent with your family allows them to better understand that they need to maybe prepare their own lunch and entertain themselves indoors. This alleviates pressure from you in the long run.
Bromfield further explained that with better financial discipline, you can afford your premiums and thus avoid putting your family in a potential difficult financial situation in future. “For now, consumers have to cope with tough times and only those who make better decision will survive the current period.’’
Defaulting on payments
Most life policies make provision for the customer to default on payment once, and then be liable for a double premium the next month.
“Considering that life insurance premiums tend to be relatively cheaper than most forms of insurance, we encourage consumers to take proactive steps to ensure that they plan ahead to keep their cover in good standing,” said Bromfield.
The issue arises, however, with back-to-back defaults, as this could lead to the policy lapsing.
“This is one of the reasons we introduced the measure of checking policy lapses against the national population registry because in some cases, funeral policies lapse because people have deceased. In such cases, we are able to pick up and try to track their beneficiaries for a pay-out,” Bromfield noted.
He added that every insurer abides by their own criteria, and this is also product dependant.
“That said, a reliable record is always important in assessing the risk profile of applicants of financial products - the manner and degree to which this is done varies,” Bromfield concluded.