Don’t skip your premiums this December – the importance of paying premiums during the festive season

Insurance – As we head into the festive season, violent crimes such as armed robbery, burglaries and carjacking increase exponentially. A marked increase in road accidents also sully what is supposed to be a time for being merry and reconnecting with family and friends.

Disturbingly, some policy holders opt to skip their premium payments during this time and inevitably increase their risk exposure.

According to statistics published by the South African Police Services (SAPS), though contact crimes declined last year over the festive season, crimes such as vehicle hijacking, burglaries and murder remained prevalent.

It is for this reason that consumers are advised to make provision for payment of their insurance policies in December to ensure that their families have cover during the festive season. This will also avert the possibility of their policies lapsing and increasing their risk exposure, says Avinash Baboolal, Claims Manager at Hollard Life Solutions.

Baboolal offered these words of advice as the country enters the festive season, the peak holiday period in South Africa. Experts lament the low rate of insurance among South Africans, with a study by the Association for Savings and Investment South Africa (ASISA) noting that earners younger than 39 years face an average insurance shortfall of R1.4 million for life cover and R1.5 million for disability, while some studies estimate that South Africa faces a combined life and disability cover shortfall gap of at least R34.7 trillion.

He points out that policy holders exhaust their disposable income during the month of December through entertainment, gifts for loved ones, stationery and expenses for the new school year in January.

“One of the easiest ways some consumers can free up disposable income is to skip their policy premium payments, because insurance is, after all, a grudge purchase. What aggravates the situation is that many policy holders get paid early in December, so by the time the debit orders go off at the end of the month there are insufficient funds to meet their obligations,” says Baboolal.

Baboolal also concede that many consumers are still reeling from the impact of COVID-19 and the nationwide lockdown, which has exerted a lot of pressure on many household finances.

“The prospects of keeping policies active for consumers who have already skipped payments in previous months are dire should they also miss the December premiums, as their policies will likely lapse. For example, if a policy holder has skipped premium payments say in October and November, and then they also miss the December payment, the chances of that policy lapsing is quite high and will negatively impact payment of any claims that might arise after the policy has lapsed. Consumers who are not paying their policy premiums are increasing the risk that that their policy was supposed to protect them from,” Baboolal explains.

He adds that though policy holders who miss their December debit orders will be double debited in January, that is not an ideal scenario for consumers as they will be entering the new year on debt. “In addition, these policy holders will still be at risk because should a legitimate claim arise, the insurer will pay out less the outstanding premium provided that they have not missed any premium payment,” says Baboolal.

He points out inflationary pressures such as the increasing price of petrol and interest rates will hit consumers hard in the pocket next year. Consumers are therefore advised to review their finances and expenditure and cut back on non-essentials in order to ensure that their policies are up to date,

He advised consumers who are facing financial constraints to review their policies, or opt for lower benefits with reduced premiums.

“We also wish to advise clients to plan ahead and assess their finances and expenses honestly, taking into account the impact of interest rates, petrol and electricity increases,” says Baboolal.

He also advised policy holders who run the risk of missing their premium debits to use alternative payment methods such as Hollard Life online platforms or settling the debit payments in cash.