Friday, April 15, 2011


I'm young and healthy so do I really need all this life and critical illness insurance cover?
It's a question that many young individuals often grapple with, and for the most part, many leave getting their finances in order too late.
This is according to Craig Harding, managing director of Altrisk. This view is further highlighted in the 2010 Life and Disability Insurance Gap Study which shows that South Africans remain seriously underinsured. The 2010 study commissioned by the Association of Savings and Investments of South Africa (ASISA) and conducted by True South Actuaries & Consultants warns that South Africa's income earners aged 16 to 35 would not be able to sustain their way of living even remotely based on the current insurance cover.
"There's a tendency to think that life, disability and critical illness cover is something that you worry about when you're older- not when you're in your 20's and bolstered by superhero bravado. The reality is, the sooner you consider life cover the better as the cost of insurance products increase as you get older. If you're unlucky and suffer poor health the cost of your cover will be even more expensive. There's every reason for single people to have a life policy in place if they want to be certain that their parents or any dependants are looked after" says Harding.
"Equally important, if not more so, is cover for critical illness and disability. Few individuals enjoy contemplating the emotional and financial consequences for themselves and their family if they were to contract a serious illness or become permanently disabled. What is often overlooked is the repercussions of an impairment or disability. Will you and your family be in a position to financially provide for ongoing healthcare, therapy and other necessary lifestyle changes? The case for cover for anyone who is self- employed is even more crucial. How will a person's death or illness affect his business? is the business dependable upon him financially? A business owner's death, illness or disability can have far- reaching consequences for many other people" says Harding.
Wally Bodin, an independant financial adviser and planner adds to the debate. "Critical illness or dread disease cover has evolved since the 90's to a modern day 'must have' in financial planning. Planners no longer wait for their clients to reach a 'mature' age to put critical illness cover in place. The fact that a client in their early thirties is healthy is no reason to cover them for critical illness. This wasn't always common practise, but when one looks at statistics for cancer claims, people are being diagnosed at far younger ages than they were 20 years ago, due to medical advances and greater awareness. Recent industry claims statistics reveal that cancer is responsible for 50% of all dread disease claims. Sadly, cancer knows no age. Women are the most neglected market, and ironically, they have almost double the number of claims than men," explains Bodin.
In terms of cover and how much cover is needed, Wally offers the following advice: "An ideal structure would be a level premium pattern. This means that the premiums do not change for the duration of the policy. You might pay more per month when you are younger but you pay a lot less as you get older. By taking level cover your insurance premium will stay the same, so in your later years when you need the cover the most, you will still be able to afford it.
"Should your budget allow, take the longest guarentee term available. Long term planning is essential as this is the last bit of life assurance you are still going to have well into your 70's. Having no cover means you'll have to find the cash shortfall to supplement your loss of income. In terms of how much cover, I believe a good starting point for any cover is a thorough financial needs analysis," explains Bodin.

Still not convinced?
Based on actual experiences in 2010, True South Estimates there'll be 159 034 deaths in South Africa this year and 52 481 diability events. That's 435 deaths and 144 disabilities every day. "The bottom line is most people believe in insurance- some are just not happy to pay for it. Sadly, their families end up paying for it by suffering financially after the death of their loved one, or from the repercussions of the onerous care requirements and costs after an incident, illness or disability," concludes Harding of Altrisk.


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