Get life insurance right for retirement — here's what to look for in a policy

Daily Maverick

02-07-2025

Here's how to structure a policy, manage premiums and avoid unhappy financial surprises.
A good life insurance policy pays out a tax-free lump sum to your beneficiaries, helping them to replace your income, settle debts and meet long-term financial goals like education or housing. It also offers immediate liquidity, unlike inheritance payouts, which could take months – or longer – to materialise.
Because the cost of dying can far exceed what money has been saved, a life insurance policy could deliver more value than a traditional investment. Saving R1,000 a month takes decades to reach R1-million, but a monthly R1,000 premium could secure that cover almost immediately.
Retirement is a time when you should be enjoying the returns on your savings and investments, says Ester Ochse, product head at FNB Integrated Advice.
'If one is married, it's very important to ensure that the surviving spouse is looked after in terms of having a home while having their living expenses and, most notably, medical expenses covered.'
What to look for in a policy
'Ensuring the long-term sustainability of a life insurance policy requires a strategic approach that prioritises future affordability over immediate savings,' says Jonathan Nel, technical head at GrowthHouse Financial Planning Services.
Policies with low starting premiums often escalate sharply later, leaving retirees struggling to pay. The most effective strategy is to select a policy with a stable and predictable premium pattern, even if it means a higher initial cost, Nel advises.
Premiums are typically based on your age, gender, health, smoker status, occupation and lifestyle. Some escalate by age band, such as a 6% escalation annually from 18 to 25, and an 8% escalation from 26 to 35.
'You should compare different premium patterns and take your current affordability and personal circumstances into account,' says Sean van Zyl, financial planner at Old Mutual Personal Finance.
Choose quality cover
Whole-of-life policies provide more certainty than accident-only cover, Nel says. 'It's crucial to avoid cheaper options that only cover accidents or specific events, as many people mistakenly believe 'accident' coverage extends to all death-related events.'
Ensure that your policy includes an annual benefit increase and confirmed underwriting before the contract is signed, and that a clearly defined sum is assured.
Review annually
Premiums may be reviewed by insurers, but you should initiate regular reviews yourself. Nel advises doing this annually and especially after life-stage events such as marriage, divorce, the birth of children or when taking on significant debt.
Removing redundant add-ons, like unused premium waivers, can also cut costs.
Compare apples with apples
When shopping around for policies, Van Zyl recommends looking beyond the monthly price (see below).
Key questions to ask:
Is the premium guaranteed or subject to escalation?;
Does the sum assured (amount of life cover) increase over time?;
What exclusions or waiting periods apply?;
How flexible is the policy if your life circumstances change?; and
What's the insurer's claim reputation? DM
This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.