Life cover 101

Getting the best deal



If you’re in the market for a life insurance policy, it’s crucial to get a balanced understanding of what is out there. No one wants to feel like they could have gotten a better deal, especially when you may be paying life cover premiums for the rest of your life.

This is not only about paying the lowest price but being confident that you’ve chosen a provider that will pay out your claim.

This process can be quite a challenge. Life insurance benefits might vary between providers, each with different cover conditions and value-added benefits.

There are, however, a few rules of thumb which will help ensure you’re getting good value for your money.

Get life cover sooner

It’s common practice for insurers to do a health assessment. This may require you to answer questions related to your medical history and have blood tests done.

If you have a good medical history, you’ll be grouped with people similar to yourself. Naturally, good health means a lower chance of illness or disease, so insurers can offer you a lower premium on life cover.

If you contract a disease, suffer a condition like a heart attack or are in a accident, insurers will not accept you at their standard rates.

Your premium will either be increased or you will be declined cover altogether. By procrastinating, you’re essentially lowering your eligiblity for affordable cover.

Choose a reputable company

Insurers have very large fixed costs. These costs include regulatory costs, complex systems and capital requirements. The variable cost for issuing an additional policy is very low for them.

Larger insurers have the ability to spread costs over a large number of policyholders. This means that more of your monthly premium goes towards paying claims and less goes towards covering admin costs.

Large companies are also more likely to pay out claims as they have larger balance sheets which can handle big claims.

These companies are also very concerned about maintaining their claims payout reputation, only declining claims when clients blatantly lie or commit fraud.

Compare different providers

Each insurer applies their own formula when assessing what your premium should be. This formula places you within in a certain risk category based on the information you provide.

Your goal is to find the insurer that places the lowest risk on your life and hence offers you the best value for money.

What to look out for:

Just like choosing a new car or cell phone, the lowest price won’t always indicate the best product for your needs. Below are the additional things to consider when picking the best policy for you:

  • Premium increases: lower premiums might escalate into larger increases later on
  • Cover growth: Inflation can arode the real value of your cover over time. Cover growth will offers protection against inflation, but will also lead to higher premium increases
  • Conditions covered: disability and critical illness covers can differ greatly between different options and providers
  • Service: if the thought of getting hold of the company to make a change to your policy gives you a headache, you may want to keep looking
  • Claims reputation: having a life insurance policy would be redundant if they didn’t pay out, a Google search or visit to HelloPeter should give you an indication of this
  • Value-added benefits: many providers put icing on the cake with reward schemes (such as Multiply, Reality and Vitality) with discounts on premiums if you display the right behaviour

Jonathan Elcock,
CEO CompariSure

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