Alternatives to ditching your cover

There are a number of alternatives you should consider before you cancel your life cover, says Hennie de Villiers, the deputy chairman of the life and risk board committee at the Association for Savings & Investment South Africa. These alternatives include:

• Reducing your monthly expenses. Critically evaluate your monthly budget and cut back on non-essential expenses, such as your satellite television subscription. Be realistic about wants versus needs.

• Renegotiating your debts. You could approach your bank and creditors to negotiate the terms of your debt repayments. Your creditors may be willing to accept smaller monthly repayments over a longer period. You could also consider debt consolidation, or approach a debt counsellor for help.

• Pausing your savings. You could temporarily halt your contributions to a unit trust portfolio, or take a “payment holiday” from your endowment policies or retirement annuities (but first make sure you won’t pay any penalties if you do). Stop saving for short- and mediumterm goals, such as a holiday or buying a house, before you stop saving for retirement.

• Streamlining your shortterm insurance. Insurance on your home and vehicle is important, but you could reconsider whether you need comprehensive all-risk cover that may include your jewellery and mobile phone, for instance. You could also reduce or cancel addon cover, such as cover for your car sound system.

• Negotiating your premium payment pattern. If you recently purchased level-premium life cover, you could request to change to an escalatingpremium pattern where your initial premiums will be lower and increase over time. This would enable you to keep the same amount of cover, while giving you some short-term financial relief. You may be asked to undergo medical underwriting before the assurer will make these changes.

De Villiers says the best way to deal with financial problems is to acknowledge that you need help and consult a professional financial adviser. “An adviser will be able to examine your financial situation objectively and guide you on making the best decisions appropriate to your individual needs,” he says.