By Ross Marriner
Every now and then I am asked the question – “When is the best time to purchase life, disability, and dread disease (or severe illness) cover?” There is no single answer to this question, as every person’s individual circumstances are unique, but one fact is consistent – the earlier you take out cover, the easier it usually is for you to qualify for the cover you require.
People in their twenties and early thirties tend to focus on priorities, such as building their career, buying a car, moving into their own accommodation and paying off any debt that they might have. Few regard paying long-term insurance cover premiums as a priority. Most young people do not recognise that their ability to earn an income over the long term is really their biggest asset, and this should be protected with appropriate cover.
Nobody can predict the future with certainty. Will you become disabled and unable to work? Will you be diagnosed with a severe illness, or will you pass away at a relatively young age? It is, therefore, prudent to ensure that, if something unexpected happens, you have the necessary cover for you and your family to cope without being left financially destitute. The amount of cover required depends on your individual circumstances. When to take out this cover is the important question.
The younger you are when you apply for cover, the cheaper the premium will likely be. In addition, the younger you are, the more likely the cover will be offered without conditional loadings or exclusions due to medical reasons. Most medical conditions tend to occur as you get older. If you have a pre-existing condition, this may well affect your ability to qualify for cover and/or may affect the premium charged. When you apply for cover, you will be required to answer medical underwriting questions, after which the life company will request you to undergo blood tests and provide certain medical reports where necessary.
As you progress through the various stages of life, the risk of succumbing to an illness or a devastating event changes with age. For example, when you are young, you have a relatively low risk of having a heart attack or stroke, but according to Stats SA, road users are at the highest risk in their 20s – in fact, almost 30% of all passenger deaths happen in this age bracket.
Taking out a large amount of cover when you are in your twenties or early thirties may not be appropriate for everyone, but it often makes sense to have some cover once you have completed your studies and are starting out on life’s journey. Many people delay applying for cover until a life-changing event occurs, such as getting married or the birth of a child. This may sometimes prove to be too late. A Certified Financial Planner® will be able to explain the various options available to you and assist you to develop a plan that is both affordable and which meets your individual needs.
Rands and Sense is a monthly column written by
Ross Marriner, a CERTIFIED FINANCIAL PLANNER® with PSG Wealth.
His Financial Planning Office number is 046 622 2891