For most of us, the beginning of another year is a time for reflection, planning and renewed commitments. This makes it the perfect time to revisit an often-overlooked aspect of your financial health – your life insurance policy.
According to Susan Hunt, Chief Actuary at Nedbank Insurance, life insurance shouldn’t be a ‘set it and forget it’ purchase; it must evolve alongside you as your life progresses, adapting to your changing circumstances. ‘Your life insurance should reflect where you are in life today; not where you were 5 or 10 years ago’, she explains, ‘and regular reviews are the best way to ensure your policy remains aligned with your needs and financial goals.’
She points out that major life events, such as getting married, having children, buying property, or starting a business can significantly alter the type and amount of life cover you need. Even reaching some of the positive milestones later in life, like paying off your home loan or seeing your children become financially independent, can impact your cover requirements. It’s good practice to review your policy at least once a year throughout your life.
For example, as a young, single professional, you may need only minimal coverage, mainly to cover debts like student loans or to provide a small inheritance for loved ones. However, as life progresses, your financial responsibilities grow, and these changes mean you need more cover.
Hunt highlights that each major life change also presents a need and an opportunity to adjust your life insurance policy. For example, when you get married, you may want to increase your cover to ensure your spouse can maintain their lifestyle if you were to pass away. Having children is another critical event that typically necessitates a higher payout, as you’ll want to ensure their education and upbringing are financially secured.
If you’ve bought a home, you’ll want to make sure your life insurance policy covers the outstanding mortgage. Without adequate life cover, your family could face the risk of losing the property if they’re unable to meet mortgage payments after you’ve passed away. ‘For those with Nedbank Insurance’s MyCover Life cover, they get easy flexibility that’s built into their policy,’ Hunt explains, ‘allowing you to update your cover as your financial obligations increase or decrease.’
Another significant impact on the value of your life cover, but one that is most often overlooked, is inflation. ‘Increases in the cost of living, coupled with rising medical expenses, can significantly reduce the purchasing power of your life insurance payout’, Hunt says. ‘However, many policyholders are unaware of this impact of inflation on their cover over time, which could leave their loved ones short-changed when it’s time to claim.’
Many policies have annual increases built in to compensate for rising costs of living, but these often aren’t enough, especially in a high-inflation environment like the one we’ve experienced recently. By regularly updating your policy, you can adjust your cover to ensure it will still be sufficient for your family’s needs, whether that’s covering daily living costs, school fees contractual repayments or medical bills.
When the time comes to revisit your life insurance policy, Hunt recommends working with a financial adviser or wealth consultant. ‘A qualified and experienced adviser can help you identify whether you need more cover, if you’re paying too much for unnecessary extras, or if your beneficiaries are up to date’, she explains, ‘and they can also provide valuable insight into the best types of cover for your current situation, ensuring that your policy is perfectly aligned with your changing needs and budget.’
Life is constantly changing, and always full of unexpected turns, so ensuring your family’s financial security requires a proactive approach. ‘Revisiting your policy in 2025 might just be the most valuable new year’s resolution you make,’ Hunt concludes. ‘That way you can make sure it reflects your current life stage and provides all the modern benefits that may not have been available when you first signed on the dotted line, allowing you to rest easy knowing your family will be looked after, no matter what.’