If you are cash-strapped over the next few months, life assurers have come up with options to help you temporarily reduce your cover to avoid losing it. Picture: 123RF/JAKUB JIRSAK
If you are cash-strapped over the next few months, life assurers have come up with options to help you temporarily reduce your cover to avoid losing it. Picture: 123RF/JAKUB JIRSAK

If you have been put on short-time, forced to take unpaid leave, had your salary cut or you are the owner of a business forced to close during the lockdown, you will be facing a cash flow crisis.

You should look at cutting any discretionary spending before you turn to your regular payments, but if your cash crunch is unmanageable, you may also be forced to make plans on how to manage your inability to pay your regular expenses.

Disability cover is essential to protect your future earnings if you are an income earner and life cover is essential to provide for your family in the event of your death. This cover is not where you should cut if you can help it.

Some life companies allow you to skip a premium or two without losing or lapsing your cover, but you should do your utmost to avoid letting your policy lapse because your life assurer will then reassess the risk you pose to it. You will be older and possibly have some more health issues than you did when you first took out cover and this could increase your premiums.

However, if you are cash-strapped over the next few months, life assurers have come up with options to help you temporarily reduce your cover to avoid losing it.

Remember, however, that these options are only for the unusual times brought on by the coronavirus and the lockdown, and different companies are adopting different approaches.

Sanlam, for example, is offering its policyholders the option of cutting their life, disability and critical illness cover back to 50% to make premiums more affordable, Sanlam Life CEO Karin Muller says.  

During the three to six months after you have decreased your cover, Sanlam will allow you to increase your cover again back to what it was before you reduced it, without any medical underwriting — that is, no tests or medical questions.

This option to reduce your cover can be exercised up until July 1, Muller says.

If you are not able to even pay a reduced premium, Sanlam may let you suspend your premiums for up to three months, she says. This option is only open to you if you pay your premiums monthly by debit order, and your premiums are paid-up to the end of March, she says.

You will enjoy a grace period of one month after your first missed premium during which time you will still enjoy full cover. During the remaining two months, you will enjoy limited free ex-gratia cover should you need to claim. This will cover 25% of your death benefits and lump sum disability benefits for an inability to do your job of up to R5m.

There are some terms and conditions, especially on the disability claims and the benefit does not extend to funeral or other benefits.

If you take this premium holiday, your cover will be automatically reinstated after the three months without you having to pay the arrear contributions, as long as you pay the premium due in the fourth month.

Liberty is also allowing policyholders to reduce their cover, executive for retail solutions David Jewell says. The life company already allows you to maintain your cover for two months without a premium being paid, but it will now also allow you to reduce your premiums and benefits for up to six months on its Lifestyle Protector.

You will then be able to reinstate your cover on this policy without any further underwriting. No arrear premiums will be recovered for the period during which premiums were reduced, he says.

Jewell says if your employer is unable to pay your group risk premiums, employers and the trustee of your retirement fund have been given a range of options to manage costs while retaining group risk benefits.

Momentum Life is also offering policyholders the option of reducing their cover rather than losing it, George Kolbe, head of marketing for Momentum Life Insurance, says.

If you are a Momentum policyholder in distress you need to discuss the options open to you with your financial adviser.

Kolbe says Momentum advisers can get your signature digitally and underwriting has been streamlined so that you can still take out or amend cover without breaking the lockdown rules.

Old Mutual says if you are one of its policyholders you can also reduce your cover, remove accelerator benefits and change from annual to monthly premium payments, depending on your circumstances.

If you are unable to pay premiums on any life, disability or critical illness policy, your cover will stop but if this happens before June 30, Old Mutual will give you three months to restart your cover without a declaration of health, the company says.

Old Mutual says while it currently allows you to restart your cover twice, it will now allow three revivals.

The company says if you need to take out more cover now, you can do so and it will delay any medicals you need until the lockdown is lifted.

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