Life insurance is expensive, confusing, and untrustworthy – except it’s not

Yaaseen Albertyn

In South Africa, only 10% of adults own a life insurance policy. According to Yaaseen Albertyn, Executive Head of Business and Client Solutions at Metropolitan, this is a shockingly low figure for what is an essential financial tool.

Albertyn says this statistic highlights the pressing need to bridge the gap. “Misconceptions about life insurance, particularly its cost, contribute significantly to this low uptake. To address these misconceptions and barriers, it’s critical that we dispel myths and provide clarity on the importance of life insurance and how accessible it really is,” he says.

Albertyn provides the top three reasons people avoid life insurance:

It’s expensive
Albertyn says one of the most prevalent misconceptions is that life insurance is prohibitively expensive, reserved only for the wealthy and out of reach for most South African consumers. “This belief deters many people from even considering life insurance as a viable option. Yet, the reality is that life insurance can be tailored to fit a range of budgets and financial situations,” says Albertyn.

He says life insurance can actually be more cost-effective than funeral plans. For the same premium, life insurance often provides much higher coverage levels. As an example, a 40-year-old teacher would pay R350 for R80,000 funeral cover – and if they are able to source preferential rates, they could pay about R200 per month. That same teacher could purchase R400,000 life insurance for between R350 and R400 – that is five times more cover. The teacher would qualify for at least R1 million life cover for R400 monthly premium if they were to undergo full medical underwriting. The specific conditions under which claims are paid also influence the cost, he says.

“Policies with fewer exclusions might cost more, but they offer more comprehensive coverage,” notes Albertyn.

It’s misunderstood
Education is another significant life insurance barrier, says Albertyn. “Many people do not understand its importance or the different types of policies available. Sadly, the life insurance gap is worse in the emerging market. The gap is also particularly bad for people below the age of 40 who are most in need of life insurance because of their future earning potential. This may be due to financial constraints and priorities, but does point to limited insurance understanding.”

Life insurance is essentially a plan to ensure our loved ones are financially secure after one's death, typically replacing the salary that would have been earned. Educating the public on the differences between life insurance products can help demystify these products.

For those with lower incomes, finding affordable life insurance is top of mind. One option is to purchase term life insurance that provides cover for a fixed period instead of more expensive lifetime cover. This can result in premiums that are 20-30% cheaper, depending on your age.

Accident cover is more widely purchased due to its lower cost, but Albertyn says it is crucial to understand that accident cover is cheaper because of its limited claims exposure – only paying out in the event of accidental death. Somebody who falls ill and then passes away may leave their loves ones with no financial protection,” he says.

People don’t trust insurance
Lastly, Albertyn points to the lack of trust many consumers have with the insurance industry in general.
“People are naturally sceptical about whether insurance companies will honour their claims, and that’s perfectly understandable.”

However, Albertyn also points to Metropolitan’s claims statistics, showing that the insurer pays out valid claims within four hours. “It’s a myth that insurers are untrustworthy, but there is a standing agreement between policy holder and insurers – terms and conditions apply as they say. As long as you provide full and correct information up-front and read your policy documents, there is no need for distrust.”

For Albertyn, addressing these trust issues and demonstrating the reliability and benefits of life insurance is essential to increasing coverage rates.

“Whether its trust, education or cost, the truth is the insurance industry is much more accessible, understandable and trustworthy than most people think. Our only goal is shared – empowering more South Africans to make informed decisions about their financial security and that of their loved ones. That’s it,” concludes Albertyn.