Whether you require life insurance to ensure your dependents or debt are taken care of or you simply want to leave a legacy for your loved ones, it is vital that you pay attention to the way your policy is structured, specifically when it comes to the premium (the monthly payment amount).
There are various premium structures (which vary from one insurer to the next) and it is important to know how each option will escalate over the years. This information should be made readily available to you as premium projections are always included in risk cover quotes.
For the most part, age-rated premiums are going to appear very affordable upfront (and depending on your age, for a reasonable amount of time it may be affordable) but over the long-term, as one ages, the premium becomes almost unaffordable and in all likelihood a person would end up cancelling his/her policy. At that stage, you are years older and may have difficulty securing other cover due to affordability or pre-existing conditions.
According to Brightrock, a major Life Insurer in South Africa, a study of age-rated premium patterns found that over one’s lifetime a policyholder who chose age-rated would pay as much as 60% more for the exact same cover, than if the same policyholder had chosen a level premium pattern upfront.
A level premium pattern takes the entire projected premiums and divides them equally* over the lifetime of the policy so it may look expensive in the beginning but over the long run you are better off, financially.
It is important that your Financial Advisor is aware of your objectives so that he/she can assist with structuring your policy according to your needs. If you only need cover for a period of 5 years, you could probably get an age-rated premium pattern but if it is to leave a legacy, level premium pattern is your best option.
Contact a JHA Advisor today, we willing to assist you in this matter.
*please note, premium would still increase if your benefit increases