Handy life insurance guide

HELPING YOU UNDERSTAND COMPLEX PRODUCT STRUCTURES AND OFFERINGS

- Eric Jordaan

The long-term insurance industry has grown increasingly complex over the years. The influx of new market entrants has heightened competition, leading to more complex product structures and offerings.

Additionally, advancements in medical science have resulted in more stringent and comprehensive underwriting processes, making it challenging to obtain suitable insurance coverage while also increasing administrative demands.

These are some of the most common terms used in the long-term insurance sector.

Accelerated benefits: Initially, life insurers provided only life cover, but they gradually incorporated additional benefits like disability and dread disease coverage.

An accelerated benefit decreases your life cover if you claim any of your other benefits. For example, if your life cover is R1 million and you claim R200,000 from your dread disease benefit, your life cover reduces to R800,000.

Consequently, accelerated benefits are often more cost-effective than standalone options.

Age-rated premiums: When an insured individual selects an age-rated premium pattern, their premiums will rise annually to reflect the increased risk associated with ageing.

Initially, age-rated premiums are typically more affordable, but they can become prohibitively expensive over time.

This premium structure allows younger individuals to secure life cover that they might otherwise find unattainable. However, it is crucial to consider your future affordability when choosing this premium type to avoid potential financial difficulties later on.