Question:
I have two life policies — mine for just over R1m and my husband’s is for just over R2m. It was probably originally taken out to cover the bond. Our premiums were, until recently, about R2,500 per month. But suddenly they’ve gone up to more than R6,500 a month!
It is apparently because the policy has run for 20 years and now, because of our age, the premiums have been adjusted. I’m not happy paying that premium and would rather use the “old” premium amount and pay into our bond or something else.
But my husband is wary of not having a life policy. Our home is our only investment, with a small bond. We’re self-employed.
— Facebook Fat Wallet Community member
Answer:
The increase in premiums was likely built into the policy when you took it out, but of course, all those decades ago the idea of ever getting old seemed far away. We take your point that you want a lower premium, and here you do have options.
First, determine your actual requirements. You don’t mention if you have anybody who is financially dependent on you, such as school-going kids or maybe parents.
If this is the case then you do need some life cover to cover those expenses when you die. But you can work out what an appropriate amount would be and open new policies, or reduce the existing policy, to cover the required amount.
If you have no financial dependants and your bond is small, then maybe you don’t need any life policies after all?
Focus on your current needs rather than what you’ve paid in premiums.
Two last points: as we get older, life insurance is more expensive simply because the risk is higher. Second, make sure they are just stock-standard life policies, with no investments built in.
Insurance and investments are different products and should be purchased separately.
— Your Money team
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