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There are many different insurance and savings products on the market and a lot of people are confused as to what the differences are between the two, and exactly what they have bought. As a result, one of the questions most frequently asked by our policyholders is will they get their premiums back if they, for instance, cancel their life or funeral policy? So, let’s unpack the differences between the two products and get your questions answered!
Some simple definitions
An insurance or ‘risk cover’ policy is one that covers you only for the risk of the occurrence of the insured event. It pays out the sum assured on the policy when the event occurs to give you and your family financial protection against that risk.
One of the most common types is a life policy that protects against the risk of your death and the loss of your income, but certain policies will also cover you for injury or serious illness. Funeral cover is also an example of a risk cover policy. It covers the risk of unexpected funeral expenses when the main member or extended family members covered on the policy pass.
What this means is that you do not get your premiums back if you cancel the policy or it lapses. What you have bought with your premium is peace of mind for your family and the knowledge that you have financial protection against those risks and that in the event of death, injury or illness the policy’s sum assured pays out on a valid claim.
With a ‘savings product’, depending on the rules of the product, your monthly contribution remains your property at all times. Methods of saving include a savings account or money market account, for example, if you choose to withdraw your savings you will get your monthly contributions back, minus any fees but plus any interest earned!
The practical difference is that if you take out a R250 000 life insurance policy and you pass, even if you had only paid premiums of R10 000, your family would be paid out the full R250 000 sum assured on a valid claim. Had you saved that same R10 000 in a savings account, your family would only get back that R10 000 plus some interest, let’s say R12 000 in total.
Any financial adviser will tell you that you should have insurance policies and that you should be saving some of your income towards retirement, for your emergency funds and your savings goals.
The promise of life cover
At 1Life Insurance we will pay out the sum assured on a valid claim as a tax-free lump sum when the insured person passes away. Your life insurance policy, disablement and dread disease policies, and income protector all give some comfort knowing that your family and your income are secure. Taking out a life cover policy gives you peace of mind knowing that your family has a financial safety net, that living expenses will be covered, some or all your debt will be paid off and wealth created for future generations.
The 1Life promise
All our products are only a telephone call away or a click away. You can chat to one of our skilled call centre consultants about buying the right cover based on your individual circumstances and what you can afford. Or you can get a quote and buy your cover online within minutes and save 40% on your funeral cover premiums and up to 13% on life cover premiums.
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Your life insurance questions answered
What factors should I consider when choosing a life insurance policy in South Africa
When considering a life insurance policy in South Africa you should first and foremost consider dealing with a reputable company that is regulated and authorised to sell long term insurance products such as life cover and one that has a good claims paying record. Thereafter you should look at the benefits associated with the cover, ease of managing your policy and the after sales service you receive.
How do I determine the amount of life cover I need for my insurance policy?
You would need to spend time calculating what your total debts and assets are as well as what you want covered and for what period, such as schooling, your home and a lifestyle that your family is accustomed to. The amount will more than likely be overwhelming, but it is important to consider covering at least some of it and ensuring that your family can manage any changes to finances when you pass.
Why should a single person consider life insurance?
A single person should consider life cover when they have financial dependants such as parents or siblings. If you support someone financially, your life cover will take care of them should something happen to you. It is worth noting that being single and young, you have a higher probability of needing disability insurance, this can be added as a rider or ancillary to your life cover policy. The bonus is that premiums will be cheaper the younger and healthier you are.
How does my age impact life insurance premiums?
Your age has a direct impact on the premium you will pay for insurance. Furthermore, as you have a higher chance of being diagnosed with a dread disease, you may not even qualify for cover! It is therefore important to get your life insurance as early as possible in life to get the best risk rating and premium.
What happens if I don't understand a question on the life insurance application?
If you are unsure of any question being asked when taking out your life cover, then speak to your financial adviser, do your own research, or speak to a skilled consultant from a reputable insurance company. Buying insurance should not be overwhelming, but rather a simple, easily understandable process that empowers you.
How is a medical assessment used in life insurance applications?
A medical assessment through actual medical tests such as blood tests or medical questions are there for underwriters to understand what your health risk factors are, in order to provide a premium that aligns to your risk profile.
How quickly can a life insurance claim be processed?
A valid life insurance claim can be paid out within 24 business hours, but it is important to note that the process to get to this point can take weeks or months depending on the documentation required and the circumstances surrounding a death of a policyholder. This is why 1Life offers a Pay now death benefit of R50 000 to assist with immediate expenses such as the funeral while the claim is being processed.