Reviewing your cover is a key part of life

You would probably sooner do the chores you hate than book an appointment to review your life cover.

You may want to avoid this annual checkup because you are underinsured but can't afford to pay more for cover. Or you may not want to think about life with a disability or your family's life after your death. Or the complex trade-offs a good review involves may be putting you off.

But failing to do it could compromise your best plans to move ahead in your career, support or be supported by your life partner and family, start your own business and ultimately retire comfortably.

Most people make the mistake of treating their policy with an "out of sight, out of mind" approach, says Felix Kagura, head of long-term insurance propositions at the Standard Bank Group. But as your life progresses, your circumstances change. If your life policy is not adjusted accordingly, you may find your cover is no longer appropriate for your needs, he says.

If an annual review feels like an invitation to a broker to sell you more cover, you may have the wrong adviser.

An adviser acting in your best interests should be willing to engage you on these questions:

• Do I need more or less cover?

Regularly reviewing your life cover allows you to update the amount of cover you need and the cover you have in place. Any major life event will definitely necessitate an adjustment of your cover.

It is also good to go through your policy regularly to refresh your memory on exactly what is and isn't covered, Kagura says. You may be under the impression that you are covered for certain things when in fact you aren't.

If you are underinsured, don't feel alone, Kagura says - 40% of working South Africans are underinsured.

If you cannot afford adequate cover, take out as much as you can with a view to
increasing it when your finances improve, says Ian Beere, chair and wealth manager at Netto Invest.

If you can't afford to take out the cover you need, spread your risk by taking out a bit of each of disability and life cover because you can't predict what may happen to you.

Don't delay taking out cover altogether, as it will cost you in terms of a higher starting premium. Kagura says the risk of dying increases significantly from the age of 30 and so does the cost of insurance. Premiums typically increase by 60% to 150% from the ages of 25 to 45, he says.

• Does my cover complement my group life cover?

You should check that the life cover you buy in your own name complements any cover that you enjoy through a group-life scheme your employer or employer-sponsored retirement fund offers.

Group cover is more often than not much more cost-effective than a personal policy and is unlikely to increase at the rate your personal policy increases by each year, Gareth Collier, director and financial planner at Crue Invest, says.

If your group scheme benefits for life, disability and severe illness are a lump sum that is a multiple of your salary, your cover will increase with your salary increases, which could, depending on your circumstances, reduce your need for cover in your name.

If your group scheme offers income protection, check what portion of your earnings is covered for temporary and permanent disability, and don't over-insure as your
assurers will not pay benefits that, combined, exceed your earnings, Collier says.

He suggests checking if you can increase your group risk cover voluntarily. You may need to answer questions and take tests for this voluntary cover, but you will still enjoy group risk rates and you may avoid being declined or having exclusions if you are older or have a medical condition.

Check the definitions used to determine if you can claim on group and individual cover.

And check whether you have the option to convert group life and disability cover to cover in your own name, or you could be faced with taking out new cover at an older age should you need to leave your employer, Beere says.

• Are there new benefits or policies I should consider?

Life assurers are constantly innovating to stay competitive and new players are entering the market.

Your adviser should recommend replacements or enhancements - such as improved definitions of conditions and payouts or the addition to disability policies of cover for impairments, such as the loss of limb - when these can improve your cover cost-effectively, Beere says.

If you have developed a condition since taking out cover, you may be stuck with your existing policy as new cover could exclude your illness or load your premiums.

• How will my premiums go up?

You need to increase your cover amount annually to keep up with inflation, unless you have saved more for goals like your children's education or your own retirement, or you have paid off debt.

Premiums increase each year as your cover increases, but some policies have lower starting premiums with steeper increases each year. If your cover is escalating at an unaffordable rate, review your options.

• What can I do to pay less for cover?

Life assurers offer different cover options, pricing structures, ways of rating your risk and loyalty or reward benefits. A good adviser will explore which are best for you by taking into account your circumstances, the life company's track record for paying claims and its willingness to offer you cover with or without loadings.

Some companies will reward you with a cashback benefit that is based on your status in its healthy lifestyle programme.

Others focus on offering flexible cover that can be tailored to your needs without wasting premiums.

Beere says you need to consider whether the cost of cover is higher to begin with, whether you will access the richer benefits on offer and how likely it is that you will qualify for the cashback or bonus.

Some companies offer a premium discount in exchange for information about your lifestyle, which the insurer can use to determine the risks to which it is exposed, he says.

One of the best ways to reduce the cost of your cover now and into the future is to avoid lifestyle illnesses and smoking.

Kagura says premium rates for smokers can be anything from 20% to 50% higher than the rates for nonsmokers.

Reducing or avoiding debt also means you won't need cover for your debt and you can save more. Higher savings balances in turn reduce the cover amount you need and hence the premiums you will pay.

Beere says if your premiums were loaded because of a condition, being reassessed once you have recovered or brought it under control through diet, exercise or treatment, can get the loading or exclusion removed.