Your policy means that your family will have financial assistance in difficult times. To keep this peace of mind, you need to pay your monthly premiums. But what if you can’t?
We’ve all had months where the budget just doesn’t stretch far enough, and we’ve had to make a choice of paying this bill – or that one. It’s a tough spot to be in. You might decide to not pay your insurance policy premium when you have one of these months, but it is a decision that could hurt your family’s financial situation in the long run.
Why is paying my premium every month so important?
Insurance is a contract between you and your insurer. You both agree to do certain things. Your insurer agrees to pay valid claims when they are submitted. You agree to give your insurer complete, honest information about you and your health, and to pay your premiums when they are due.
If you don’t pay your premiums, the contract is no longer valid, so the insurer doesn’t have to pay a claim.
This could put your family at significant financial risk.
What happens if you miss a payment on your insurance policy?
In short – your insurance policy can be cancelled, and you are not covered. Insurers call this a “lapse”.
Missing a premium payment means that if something happens such as you become ill or pass on, the claim may not be paid. Unfortunately, this could put you and your family in financial difficulty.
In the table below, we’ve looked at the different insurance policies and who could be affected if a claim is denied because premiums aren’t paid.
You may face higher premiums if you miss payments
A policy that lapsed less than 12 months ago because premiums weren’t paid can, in most cases, be reinstated. But you may need to pay the premiums you missed.
You could also face a higher premium on the reinstated policy than your previous premium. Why? Because your risk may have changed. Insurance premiums for policies such as life cover, funeral cover, dread disease and disability are based on your age, health and occupation.
So, if you reinstate a policy and you are older, your premium may be higher. And if you are diagnosed with a chronic condition such as high blood pressure or diabetes, your premium is likely to be higher because this could increase the chances of an illness or death earlier than expected.
Missing a payment isn’t a good option
Even if it seems an easy way out in a tough financial month, missing a payment on your insurance policy is something you should avoid. And remember that most banks charge for cancelled or bounced debit orders. So you may also have to pay bank charges, which isn’t great when you’re looking for extra funds.
You have options when a payment is missed
Insurers collect payments by debit order, so if a debit order bounces or is cancelled we will notify you that there is a missed payment. We’ll ask you if we can debit your account again, or if you need to make an alternative arrangement.
You also have the option of paying at selected retail stores.
Contact us if you are worried about a debit order bouncing
Talk to us
We know there are times when money is scarce and want to help you keep your policies active. So if you do have a month where you will have a problem paying your premium, let us know. You still need to pay your premium, but we can also look for solutions, such as reducing cover to make your premium more affordable in future.
Look what difference insurance makes
We did this as an example:
Mrs Ndlovu lives with her partner Abel and their children Thumi and Stephen. Mrs Ndlovu has a life insurance policy for R1 million with disability and dread disease of R500 000. She has a funeral policy for her family and parents, who are all insured for R20 000.
Mrs Ndlovu is the main earner in the household and her brother and parents live with the family.
Mrs Ndlovu is diagnosed with Stage 3 lung cancer and requires extensive treatment
Her dread disease policy pays out the sum assured which she uses to pay for treatment not covered by medical aid or available quickly at state facilities. She also uses some of the funds to cover expenses when she has to take time off work to deal with the side effects of the treatment.
If the policy is cancelled because a premium is missed, Mrs Ndlovu may have to go on a waiting list for treatment at a state facility far away or try to raise extra funds. She won’t be able to replace the income she has lost if she cannot work when she is undergoing treatment.
Mrs Ndlovu passes on
Her family are left without her income, but because they have a pay-out of R1 million from the life policy, they invest this money and use the income to pay for school fees, the car and house repayments.
If the policy is cancelled because a premium is missed, Mrs Ndlovu’s family won’t have the R1 million and may have to move house, sell the car and move to a new school.
If Mrs Ndlovu has missed a payment on her funeral policy, the family will also have to find money to pay for a funeral service.