Lee Bromfield, CEO of FNB Life, says given the high cost of living and uncertain economic environment, being caught off guard by a funeral, which may cost R30 000 on average, can place you in a far worse financial position.
He urges consumers to ask themselves these important questions before cancelling their policies:
Are you really saving?
Keeping up with premium payments is unlikely to break your budget. Funeral cover is currently one of the most affordable forms of insurance available to consumers in South Africa. For instance, an adult aged between 18 and 64 can pay as little as R35-00 a month for R10 000 cover.
What are the consequences?
When your policy lapses, you will lose out on all the premium payments you had made. Furthermore, you and your beneficiaries would have to complete a six months’ waiting period for natural death, if you were to take up a new policy.
Have you re-evaluated your budget?
Don’t opt to cancel financial commitments that you consider grudge purchases, but rather make an informed decision based on a thorough evaluation of your financial position.
Consider drawing up a comprehensive budget and separate needs from wants, to establish what you can really do without. This will help you save by cutting back on luxuries and ensure that you have enough money reserved for your needs.
“If you are unable to resolve the situation by yourself, consider seeking expert advice,” says Bromfield.
Do you have a plan B?
Many consumers who have cancelled their policies and do not have an alternative often turn to unscrupulous lenders, such as mashonisa’s, who can charge up to 50% interest or more on a loan.
“If you find yourself having to make tough decisions due to financial difficulties, always weigh the consequences and alternatives available before taking drastic measures that can expose you to even higher financial risks,” concludes Bromfield.