How relevant is your insurance amid the Covid-19 reality?

September 29, 2020

The current global economic shock and decline in living standards caused by Covid-19 is evidently unparalleled and will undoubtably have long lasting effects on our daily living and in the business fraternity. It has disturbed the thread of every social and economic structure across nations, continents, and communities at large – exposing our vulnerability to unprecedented health disasters.

The relevance of maintaining your insurance

Reality has revealed an urgent need to review our approach on many aspects, amongst them being the need to relook at how we address financial and risk planning. In an attempt to manage expenses in these tough economic times, many employers and employees reduced salaries for a period of time. This has resulted in employers and employees requesting contribution holidays towards their retirement savings to alleviate the impact of lower salaries. While having done that, it is important to maintain the risk insurance cover. This will provide members with protection should they lose income due to illness, disability, or in the event of death – all depending on scheme’s risk insurance structure. As tempting as the thought might be to cancel some of these policies, the risk of not having the cover in place will leave the members dependants in a financially vulnerable position should the insured event be realised. The financial consequence could be too much to bear, as compared to the sacrifice of rearranging their budget to continue with the premiums, despite the reduced income.

How comprehensive is your insurance?

At the height of the pandemic, many members realised how their current insurance covers fell short of mitigating the financial risks they, or their dependants, would be exposed to in the case of a risk event. In addition, they realised the importance of having adequate disability or critical illness cover, many insurers confirmed cover remained unaffected due to the Covid-19 outbreak . This might be in the form of tweaking existing life covers to cater for the risk of virus outbreaks, or lump-sums to those who can prove their inability to earn an income for a specific period. One agile insurer has already instigated a Pandemic Shield insurance policy which operates in this fashion. This will greatly assist lives assured who are commission earners, informal traders, freelancers, and independent contractors.

Will insurance providers keep up with the times?

Some insurance providers are focusing extensively on the increased exposure to healthcare workers, having seen many in the healthcare sector succumbing to the virus in a short space of time. Whether these risk products will replace any traditional risk policies already in place remains to be seen and may be interrogated using financial life planning fundamentals provided by your Certified Financial Planner- which include forging a balance between your healthcare and other insurances alike.

A conundrum is faced by the middle- and lower-income groups to buy more insurance cover in an economy that has plunged by over 50% in its GDP in the second quarter of 2020, the steepest decline since 1960. Exacerbating the need for adequate insurance coverage, yet, with less earnings.

It is apparent that actuaries have a complicated task ahead, of remodelling mortality and morbidity rates as they consider increased exposure to certain socio-economic groups with varying accessibility to adequate healthcare facilities, inclusive of the deferring risk of exposure to those living in urban cities as compared to rural living.

It can be concluded that money conversations about for the financial ramifications of increasing or decreasing risk should be conducted with your financial planner, as it is paramount for you and your dependants financial security in the uncertain times the world is experiencing as a result of the Covid -19 pandemic.


Article written by

Chris Ntlama

Retirement Fund Consultant

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