Short-sighted excuses for not buying insurance could rob your family of financial security

To many South Africans, insurance is something to be avoided. It seems senseless to pay out hard-earned cash for something that may happen when money is needed for everyday essentials. However, what appears to be a simple money-saving move has the potential to be financially devastating says Felix Kagura, Head of Long-Term Propositions at Standard Bank.
Although insurance is a financial safety-net everybody needs, there are many people who never quite understand its importance, and so dismiss an essential personal financial planning tool that can help with short-term and long-term requirements. The outcome leaves them vulnerable to events that could cost themselves and their families dearly, says Mr. Kagura.
Some of the most common excuses for not paying insurance include:
• “I am single, so I don’t need life insurance”
The opposite is true, says Mr. Kagura. “We can all be faced with unexpected events. Within minutes, our lives can be changed forever. Planning for these eventualities means that we will not have to rely on others.”
“Providing for your death, critical illness or total disablement could also ensure that whomever you have nominated as a beneficiary can settle any debts you may have. If you pass away and there are assets to disperse, they will not be swallowed up by funeral and other costs.”
• “My spouse and I are both young and earn high salaries. We don’t need life insurance because we save for our futures”
The question we should all ask ourselves is ‘What if?” “The sudden loss of a spouse can have a devastating financial impact on the remaining partner. Suddenly, savings become insignificant when a bond, car and other payments are called in. Of course, the surviving spouse also has to adapt to the fact that household income is reduced. Furthermore, a disability that could end one partner’s ability to earn an income and also require expensive medical support could soon eat through any savings.”
“It is easier to ask these questions and then plan for the unimaginable by having insurance than hope that nothing will happen,” counsels Mr. Kagura.
• “Because I stay at home and don’t earn a salary, I don’t need insurance”
Before making this judgement, it’s best to do some investigations. For instance, if you are a stay-at-home mom, it doesn’t necessarily follow that what you do doesn’t have a value. Write down what would happen if you were out of the picture and your spouse suddenly had to buy services to get the kids to school, help with their homework and ensure that they were looked after. You will be surprised at what you find. In addition, a critical illness diagnosis can also have a negative financial impact on the whole family.
• “Life insurance is to provide for children. We don’t plan on having a family”
Simply not true. Spouses need to rely on each other for support even if there are no children in the equation. A life insurance policy can cover all costs involved in a partner’s passing and also ensure that the surviving partner can continue living without having to compromise his or her lifestyle.
• “I have a group policy arranged by my employer, so don’t need anything extra”
There is no doubt that group cover is a great perk. However, coverage is usually restricted in line with the rules of the schemes. This payout may seem like a significant amount of money, but if you pass away before you retire or are disabled, funds will be limited and may not be enough for your family’s needs. “The best thing to do is consult an expert. An insurance advisor will be able to help plan a policy that will cover you adequately and also take account of inflation. Additional policies, such as group cover, will be included in the calculations.”
• “I can get better returns from the stock market on investments. Why shouldn’t I create my investment portfolio instead of buying insurance?”
Life insurance is designed to provide certainty about the future and help your family through unexpected events. There is no guarantee that equity-based investments will perform satisfactorily year-after-year.
“There is an old adage that says’ just when you have everything planned, life happens.’ As life is uncertain, there is no guarantee that you will have saved enough, or saved for long enough, to guarantee your family’s future if the worst happens.”
It can also be tempting when things get tough to think about skipping premiums on policies or cancelling. Some people who have been paying policies for some time consider cashing them in and taking the cash settlement.
“Sacrificing insurance cover that could impact on your welfare or that of your family’s generally isn’t a good idea. It is also better to borrow against a policy than cash it in. You can access the cash, but your coverage, although reduced will stay in place.”
“As with all things involved with personal finance, it pays to get professional advice. This advice is especially so when you need to access cash, and the solution seems easy-cutting back on insurance. A professional adviser will be able to assist and provide solutions that will ensure you and the family always stay covered,” concludes Mr. Kagura.

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