When comparing, or wanting to take out new long-term assurance, it is important to know what different types of offerings there are, and what the consequences of these offerings may be.
One important difference is identifying if certain cover is accelerated or stand-alone. If cover is accelerated, additional cover such as disability or critical illness claims will cause the insured’s life assurance to reduce by the same value as a successful claim, whereas if the cover is stand-alone, the life cover of the insured person will remain at the same insured value and will not be reduced, whether they are paid a claim or not, on any additional cover. Although having your additional cover accelerated against your life cover will reduce the premium by a very small margin, it can completely eradicate any good intentions you had when taking out your long-term insurance policy, and this drawback is usually only discovered at claim stage, when it is too late to do anything about it.
For example, if a person has taken out adequate life assurance to ensure their dependents are financially secure should they no longer be around to support them, but their additional cover such as disability cover or critical illness cover is accelerated against the life cover, and the life assured becomes disabled, they are unable to work, and therefore claims from their disability cover. The life cover is now reduced by the same rand value as the disability claim paid to the life assured. Now the life assurance cover is no longer sufficient to ensure the insured’s dependents will be financially sound. The life assured can look at taking out additional life cover after he has become disabled in order to compensate for the reduction in current cover, but now their personal circumstances have completely changed, and there may be extremely high loading on the premiums, or the insurance companies may list exclusions on the policy, which exclude the cover from being valid if the cause of death is due to pre-existing conditions, or a bi-product of pre-existing conditions, or they may even not qualify for additional life cover at all.
Although most insurance products are relatively the same, offering a similar level of cover, some insurance companies will offer a range of entry level products, increasing to a comprehensive level of cover. Because all of the insurance companies have different names for their products to try and entice new business, it can be very difficult to identify which products are comparable with each other, and which products offer what level of cover. This can lead to people switching their cover to alternate insurers, but landing up with an
inferior product.
Some of the insurance companies may also try to entice new clients by offering reward programmes (at an additional cost of course), or supposed value added benefits. When considering these options, it is important to remember the saying, “nothing in life is free”, and this is only too true in this instance. The minority of clients who follow the reward programme by the book and put in the hard yards by attending regular medical examinations, complete regular questionnaires, maintain a healthy lifestyle and measure their fitness routine may benefit from this, but it is the majority of us who sign up for the reward programme, and aren’t able to participate because life gets in the way, who subsidize these costs, and ultimately results in us paying more for our long-term assurance than is necessary.
Lastly, long-term insurance premiums usually increase by a far higher percentage than inflation, causing the monthly premium to become over inflated over time. For this reason, it is critical that clients compare their cover every 2 – 3 years to ensure they aren’t over paying, and that their cover is still adequate for their
unique needs.
If you are unsure if you are adequately covered or if you are paying a market related premium for the cover you do have, speak to your Resolute Wealth Management Private Wealth Manager for us to advise you as to what cover is required, and we will request comparative quotes from a variety of insurers on your behalf in order to ensure you are paying the best premium for the cover you require.
