The Risk Of Being Uninsured

The mere mention of the word ‘insurance’ makes many uncomfortable. It is something they would rather ignore or speak ill of.  Insurance experts say it is a necessity to have different types of insure in order to manage a risk if something happens to you or your property and helps you recover from the difficulties and financial hardship caused by unexpected events that cause injury and/or a financial loss. The person who buys the policy is known as the policyholder or the insured. In return, the insurance company who issues the policy to you promises it will compensate you under certain loss or damage circumstances as set out in the policy.

Broadly speaking, insurance is about protecting yourself and your family, or your business, from a loss from which you wouldn’t otherwise be able to financially recover. However, most emaSwati seem to be under the impression that insurance is expensive and not easily accessible. As a result, a large portion of the population is not insured. Let’s take life insurance for instance. Many people who don’t have life insurance attribute this to lack of easy access to insurance products, lack of disposable income and lack of insurance culture.

Stephen Dlamini, a husband and father of two says he doesn’t have much money left over after paying all his monthly obligations and thus cannot afford to pay for anything more. He says he has funeral insurance cover though for his whole family.

An article by Sanlam Indie CEO Peter Castleden states that many people believe that life insurance is not affordable, yet these same people are usually able to purchase funeral cover.

“If we’re making the argument around affordability, life insurance is often significantly cheaper than funeral cover when comparing how much cover R1 of premium will buy. At the extremes, an individual may be able to get as much as 15 times more life cover for the same premium as funeral cover,” he says.

Life insurance is designed for settling debt, expenses and leaving behind financial security for loved ones.  Funeral cover is a quick pay-out to cover immediate expenses and the cost of the funeral, and that is where it stops. “Some insurers offer a baked-in benefit which pays a portion of the life cover as quickly as funeral cover would pay – effectively killing two birds with one stone,” notes Castleden.

He notes that the cultural argument is much more interesting, saying their research suggests that in many cases, extended family and community are expected to (and often do) step in to take care of left-behind children and loved ones when a breadwinner passes away. He adds that lack of access is seen as the most important reason for the insurance gap. Castleden says that there are a number of drivers behind a historical lack of access to life insurance, but one of the most prominent is the nature of the traditional life insurance distribution model itself. Since the dawn of South Africa’s life insurance industry over 100 years ago, products have been distributed predominantly through face-to-face methods – via financial advisors and brokers. And because commissions are tied to the premium size of the products they sell, financial advisors and brokers tend to focus their efforts on older, wealthier clients.

Manzini-based insurance broker Mlungisi Dlamini says all kinds of insurance – including car, home and life are a necessity. He says it is imperative for people to ask the right questions before they take out any policy but says ultimately, insurance is a life-saver.

“Consider what would happen to your life and your family if you didn’t have insurance and your property is badly damaged or destroyed by a fire. How would you rebuild your home and replace all the property that you had? It would be impossible without insurance. If thieves broke into your home and stole everything, how would you replace your clothes, furniture and electronic items without the help of insurance? Would you have enough savings, or would you have to rely on family, friends and donations to recover,” he quips.

Dlamini says non-insurance is a significant problem as most people do not routinely have enough savings to rebuild a badly damaged or destroyed house or pay off a mortgage, or replace a car. He says not having insurance can erode your savings and investments, deplete your assets or result in significant financial hardship.

“Taking the time to make sure you have enough insurance and knowing what’s covered means you know where you stand in the event of a loss. Check your cover regularly. Review the sum you have insured on your policies each time you renew them to make sure your cover doesn’t get eroded by inflation.  Make sure you understand the insurance product you have chosen by carefully reading the Product Disclosure Statement, which sets out the policy that your insurer supplies,” says Dlamini.

The Financial Services Regulatory Authority advises the public not to enter into any agreement with companies or individuals that are not registered with the Authority.