Why So Few South Africans Get Life Insurance

Apr 5, 2023 | Life

According to the Financial Sector Conduct Authority’s (FSCA’s) 2022 Financial Sector Outlook Study, it appears that around 10% of South Africans reported having life insurance, which is down 2% from the 12% stats released in 2019.

To put it another way, only one in 10 adults in South African have taken out a life insurance policy. No matter which way you swing it, that’s a pretty low figure – a mere fraction of our population who have what is regarded an essential financial tool.

However, getting life insurance can be a daunting and frustrating process for the average South African. Let’s take a look at just a few of the barriers that can keep people from obtaining this incredibly crucial insurance product.

The General Affordability

Many people believe that life insurance is too expensive and out of their reach. Importantly, the monthly premiums can be difficult to maintain, especially for those with lower incomes.

What we can say about this, is that you should always talk to your insurer before you cancel any insurance policy. In particular, if you cancel your life insurance policy you’re likely to lose all that money you’ve already paid in. Talk to your insurer about a possible solution that allows you to maintain your cover.

There’s A Lack Of Education

There’s a general lack of understanding about life insurance and how it works. Some people may not realise the importance of having life insurance, while others may not know which policy to get.

Let’s start you off by saying that life insurance is the plan you make to ensure that your loved ones will be taken care of when you die. The general idea is that it should replace the salary you would have earned during your life. To that end, the amount you choose is based on your earnings, your financial needs, and of course, what you can afford.

We can also shed some light on the different types of life insurance policies that are available. Just keep in mind that the two that you’d likely be interested in are whole life and term life insurance.

A few types of life insurance:

  • Whole life insurance: Insures you for your whole life. Your premium is made up of a savings portion and an insurance portion, and when you die, your beneficiaries receive money (a “death benefit”).
  • Universal life insurance: Also called adjustable life insurance, because you can increase or decrease your death benefit to better suit your circumstances.
  • Group life insurance: Typically offered by employers as part of your employment benefits, and so your premiums are based on the group as a whole, not on you as an individual. You can usually increase your cover out of your own pocket.
  • Term life insurance: Insures you for a fixed period (like 10 or 30 years) for a fixed premium, and if period ends before your death, you can renew it at a higher premium for the same death benefit.
  • Credit life insurance: You take out this policy to pay what’s owed on a loan if you die before the loan is paid off.

Legitimate Health Concerns

Medical underwriting is a necessary part of the life insurance application process, and some people may be denied coverage based on pre-existing medical conditions or a high-risk occupation.

Language Barriers

Many South Africans encounter difficulties navigating the life insurance process due to language barriers. Insurance documents and terminology can be complex, and a lack of proficiency in English can make the process even more challenging.

Thankfully there are more insurers in the market who have abandoned the archaic phrasing and technological jargon in favour of plain English that makes their terms of cover more understandable.

Trust Issues In The Industry Trust in insurance companies is low in South Africa. Many people are sceptical about whether or not insurance companies will pay out claims, which can dissuade them from obtaining coverage in the first place. Sadly, this extends to life insurance companies.

Feeling Informed?

No one really wants to think about their own mortality, but it’s a fact of life. One day, we all will pass away and how we plan for what happens next can have a huge impact on those we leave behind.

While it’s true that getting life insurance in South Africa for the average person can be difficult due to a variety of factors, what’s important to realise is that this is a vital means of providing a safety net for loved ones in the event of your unexpected death.

We trust that this information will help you make an informed decision around overcoming these barriers and getting life insurance.

Click here to get a free Will drawn up by a professional team and give your family even more assurance that they will be taken care of, no matter what happens.

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