I CAN’T PAY MY MONTHLY PREMIUM What to do when you can’t afford your insurance premiums
With so many South Africans facing increased financial pressure in the current economic climate, finding oneself in the position where your insurance debit order is “bounced” due to insufficient funds in your account is not uncommon. What is the best way to react in this situation and what are the implications on your cover?
Contact your insurance provider While it might be more tempting to feign ignorant bliss, it is better to let your financial advisor or insurance company know. It may be a once-off situation, or it may be more permanent due to job loss; either way, they are best-placed to advise you on how best to move forward.
Understand the fine print The consequences on non-payment differ from one insurance company to the next. Most companies allow you up to three months grace to catch up with your premiums (provided they are risk-only policies), but you do run the risk of your cover lapsing. If you fail to pay your outstanding premiums at all during this grace period, your cover will likely lapse from the date of your last premium payment. Bear in mind that if you decide a few months later to re-instate your cover, you will most probably have to take out a new policy, typically with increased premiums. If you have a life type insurance policy (ie where there is a savings component to the premiums), your premiums might be drawn from the investment value of your policy – while the value of your policy will decrease, at least your cover and policy will stay intact.
Some insurance companies also allow you to apply for a 12-month “break” from paying your premiums. You will lose your cover during this time but your policy will remain in place.
Don’t cut this cost It might be tempting to let your insurance costs be the ones that “bounce” when you’re in a tight spot – the benefits of buying groceries are more tangible than the value of a medical aid policy. However, if you consider the risk cost, as well as the associated costs of getting a new policy, it’s just not worth it. You can try to reduce your insurance costs by paying them upfront, and receiving a substantial discount (not the nicest way to spend your annual bonus, but certainly sensible), or even shopping around for a better deal. If you choose this last route, remember to consult a qualified broker and to not mistake price for value!
