Although the repo rate is not expected to decrease, it is important for consumers to rather keep their insurance cover. As the cost of living continues to soar, many South Africans are struggling under the financial pressure of rising inflation.
The prospect of unchanged interest rates, with the Reserve Bank likely to maintain the repo rate at 8.25%, brings no respite from the mounting pressures on people’s pockets. In these challenging times, it’s crucial to carefully assess every expense to avoid cutting essential items like life cover and retirement savings, Roxanne Tobias, actuary and head of marketing and communications at Sanlam Risk and Savings, says.
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“Life insurance and retirement savings are not just expenses. They are vital safeguards for your financial future. Skipping contributions can have severe negative effects now and in the long term. If you cancel your risk cover, it could be costlier to reapply in the future, with higher premiums. Before you cancel cover, ask yourself if you could bounce back financially from a costly ‘life curveball’.”
In a time of financial pressure, Tobias advocates shifting priorities and going back to basics with a budget. “Understanding and managing your budget is the first step to ensuring you retain crucial insurance and savings products.
“By meticulously tracking your spending for a month using a budgeting app or even a simple paper record, you can identify and eliminate unnecessary expenses. This process will help you create a realistic budget that prioritises essential costs.”
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If money is extremely tight, Tobias suggests considering these options rather than cancelling risk cover:
“It is important to remember that costs, such as the repo rate, will continue to increase and life events such as health issues or job changes could make it difficult to obtain the same cover later if you cancel your policy now.
“Where your retirement savings are concerned, it might be tempting to cancel your plans completely, but even in this scenario you may be able to get some short-term relief by temporarily reducing your contributions. And where applicable, you can take a “payment holiday” from your retirement annuities.”
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Tobias says before making any changes, it is important to consult with a financial adviser to conduct a thorough risk analysis for you. This will help to determine the necessary cover needed and assess your ability to manage risks and reach savings goals if you decide to reduce insurance cover and savings.
She says while insurance may seem like a ‘grudge’ purchase, foregoing it today can lead to far greater challenges tomorrow.
“Getting ahead starts with getting started. That means thinking about the future and planning for it today. A financial adviser can walk this journey with you and figure out smart ways to cut costs, prioritise pivotal expenses and save more.”
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