Why cancelling your insurance cover should be a last resort

The writer suggests cancelling cover only as a last resort. Instead, seek options like a payment holiday to have temporary relief. File photo.

The writer suggests cancelling cover only as a last resort. Instead, seek options like a payment holiday to have temporary relief. File photo.

Published Jun 25, 2024


Lindelwa Skenjana

CURRENTLY, 76% of South Africans struggle to make their money stretch to month-end and, on average, 65% of people’s salaries are used to service debt. In this high-inflation environment, making tough financial decisions is unavoidable, and Asisa reported a concerning lapse in risk cover policies last year.

I strongly suggest cancelling cover only as a last resort. Instead, seek options like a payment holiday to have temporary relief.

It’s crucial to think long-term. Cancelling your cover now may save money in the short run, but it could cost you dearly down the line. If you face a costly financial setback, the lack of insurance can make it incredibly difficult to recover.

The risks of cancelling your insurance cover

Cancelling your insurance policy might seem like an easy way to cut costs, but it comes with significant risks. One of the most important points to consider is that you may not be able to secure a new policy with the same terms and premiums in future. Age, health changes, and market conditions can all affect the cost and availability of insurance.

Financial recovery without cover

Consider the potential impacts of a significant financial setback without the cushion of insurance. Could you bounce back from unexpected “life curveballs”? Without cover, you and your family might face severe financial hardship, potentially wiping out savings and leading to debt accumulation. If you’re considering cancelling your cover, first ask yourself:

– Can I afford to replace my cover in the future?

– How will my family cope financially if an unexpected event occurs?

– Am I willing to take the risk of being uninsured during these uncertain times?

Alternative Measures to Maintain Coverage

Instead of cancelling your cover, have a conversation with your policy provider to see what other options are available. Here are some of the temporary relief measures you may be able to negotiate:

1. Reduction in cover: One option is to reduce the amount of cover. This can lower your premiums while still providing you with some level of protection. It's a middle ground that ensures you maintain a safety net without the full financial burden of your current premium.

2. Removal of life assures: If you have multiple lives assured on your policy, consider whether it's feasible to remove one or more individuals temporarily. This step can significantly reduce your premium costs while keeping the primary insured parties covered.

3. Removal of premium escalation: Premium escalation can increase your insurance costs over time. By opting out of this feature, you can keep your premiums stable and more manageable, especially during tough financial periods.

4. Accessing a payment holiday: Some insurance policies offer a payment holiday for policyholders who qualify. This option allows you to pause your premium payments for a specified period without losing your cover. It can be an excellent short-term solution to maintain protection during a financial crunch.

Many providers are committed to helping policyholders during this time. Have the courageous conversation, be upfront about your circumstances, and see if you can find a solution together. For example, at Sanlam, we offer a range of support measures including the ability to pay arrears in instalments, downgrade cover, remove the annual premium escalation, and potentially access a premium holiday.

Additionally, policyholders can benefit from part withdrawals, unemployment and pregnancy benefits, and a three-month grace period before a policy lapses. We also allow for the collection of outstanding premiums at the claims stage and up to twelve non-consecutive premiums can be missed before the policy lapses.

While cutting costs is essential in tough times, maintaining some level of insurance cover is crucial for long-term financial security. Explore alternative measures, consider the long-term implications, and ensure that you make an informed decision that safeguards your and your family's future.

* Skenjana is the head of digital marketing and CX for Sanlam Retail Mass.