If you are a generally healthy person, one of the ways to reduce the cost of life cover is to ensure that your policy is underwritten.
You will know if your policy is underwritten if you were required to answer lengthy questions about your health and lifestyle and had medical assessments, including blood tests.
If you only had to answer a few basic questions over the phone, your policy has limited underwriting. As an insurer is not fully informed as to your health status, they will charge more to cover potential risks and there are usually exclusions and waiting periods.
If you passed away within a short period of time from an illness, and your policy was not underwritten, they may not pay out. This is to prevent people who already know they are ill from taking out cover just before they die.
The cost savings of an underwritten policy
To give you an idea of the cost saving, a 26-year-old woman who wanted life insurance to the value of R50 000 would pay R25 a month for an underwritten policy where a health check was done. In comparison the same woman would pay R120 for a policy that was not underwritten.
A 42-year-old man who wanted R250 000 worth of life cover would pay R110 per month for an underwritten policy compared to R515 for a policy that was not underwritten. Just by having a medical assessment, he would save nearly R5 000 a year.
Funeral cover is a good example of a policy that is not underwritten, which is why it is more expensive than underwritten life cover. Funeral cover should only be used to cover the cost of the funeral and not to cover the living expenses of your family.
Funeral cover has a very specific role in meeting immediate funeral expenses. It pays out in 24 hours, it can provide for extended family and you can purchase cover for smaller amounts. Life cover is there to provide for your family’s longer-term needs like your children’s education and to settle your home loan or car finance. So, it tends to have a higher insured value.
For this reason, it is important to make sure you have your policy underwritten to benefit from lower premiums.
Note that most life policies include cover that pays out a set amount within 24 hours of a death to assist with funeral expenses. This however, is only for immediate family.
When taking out insurance, make sure you are taking the right cover for the right needs so you are not paying more than you should.