With the rising cost of living, many Namibians are burdened by financial pressure, which is aggravated by inflation.
Facing increasing financial pressure, many policyholders are tempted as a first reaction to cancel or stop paying their insurance and retirement premiums to ease the financial burden.
Skipping contributions can have severe long-term impacts.
If you cancel risk cover now, it may cost you a lot more to reinstate at a later stage.
By tracking spending for a month, using a budgeting app or paper record, you can identify unnecessary costs and create a realistic budget that prioritises vital financial safeguards.
Insurance policies, particularly life insurance, provide critical protection for loved ones in the event of an unexpected death, ensuring they are not left with financial burdens.
Similarly, maintaining retirement savings contributions is essential for building a secure future, as stopping payments can lead to inadequate funds during retirement.
By continuing to honour these premiums, individuals can safeguard their financial well-being and avoid potential hardships down the road.
If finances are extremely tight, consider these alternatives rather than cancelling your risk cover:
1. Adjusting benefit amounts: Instead of cancelling your cover altogether when you experience financial pressure, you can reduce your cover amounts. When your financial situation improves, you have the flexibility to increase your cover back to the original level without having to undergo full underwriting, subject to certain terms and conditions. This allows you to maintain some level of financial protection in case of illness, disability, or death. Some insurance cover is better than none.
2. Premium holiday options: Some insurance products offer a premium holiday option, allowing you to temporarily pause payments without losing your cover. Contact your provider to see if this is available to you.
3. Healthy lifestyle discounts: If you’ve maintained a healthy lifestyle, such as quitting smoking for over a year, you may be eligible for lower premiums. Contact your insurer to enquire about revising your rates.
Costs will continue to rise, and life events may make it harder to get cover later if you cancel your policy now. While insurance may seem burdensome, cancelling it can lead to bigger problems. Consulting a financial adviser for a risk analysis to determine your cover needs and potential risk exposure is crucial before you make changes.
Moreover, planning for the future with the assistance of a financial adviser can also help you cut costs, prioritise essential expenses and secure long-term financial stability for you and your loved ones.
*Wendy Naruses is Marketing and Communications Manager: Distribution at Sanlam Namibia
