Almost one in five people have been forced to cancel their life insurance because they can no longer afford the premiums.

Although 58 percent of respondents to a survey of visitors to www.justmoney.co.za currently have life insurance, 18 percent said they no longer have life cover because it costs too much, whilst a further 14 percent admitted they need to get life insurance.

A lucky four percent — or perhaps a deluded four percent — of people said they don’t need life insurance because they are 'as fit as a fiddle'!

Paul Beadle, managing director of www.justmoney.co.za, said: "The fact that almost one in five respondents say they have had life insurance, but have been forced to cancel the policy because they can’t find the money to pay for it, is a shocking statistic. If they are so strapped for cash that they cannot afford such vital protection, how will their families survive if they cannot work?

"Life insurance is a vital financial safeguard for people that provides for their loved ones if the breadwinner cannot work due to sickness, disability or death. Yet as our research and other data show, millions of South Africans do not have sufficient cover and are leaving their families completely unprotected."

The poll asked visitors, 'Do you have life cover?'

• 58 percent said: Yes, I currently have life insurance.

• 18 percent said: I cancelled my cover because I couldn’t afford it.

• 14 percent said: No, but I need to get life insurance.

• Four percent said: I don’t need life cover — I’m as fit as a fiddle!

• Six percent said: What’s life insurance?

The survey's findings are supported by the life industry’s own figures, with insurer Metropolitan Life in May reporting an annual lapse rate of 40 percent amongst its policy holders. A lapse occurs when the policy holder stops paying premiums before the fund value exceeds the un-recovered costs, meaning that the paid-up value (or surrender value) is zero.

The Life Offices’ Association (LOA) also reported that the number of lapsed policies during the final two quarters of 2007 had increased by 14 percent over the previous six months and were actually 31 percent higher than the number of lapses during the second half of 2006. On top of that, the LOA reported in February that South Africans were under-insured to the tune of R10-trillion when it comes to life insurance.

Part of the problem is that consumers do not get good advice when they take out life insurance. They therefore have no real understanding of why they need cover, what benefits it offers them and, most importantly of all, whether they have a cost-effective policy.

Beadle explains: "Consumers should get advice from a qualified broker who can investigate the applicant’s personal and financial circumstances and recommend the most suitable life insurance policy for the most affordable premium. If consumers don't understand their life cover they are more likely to lapse paying their premiums early on. Not only will this leave them unprotected, but it's also money down the drain."

Some of the key questions consumers should ask their life insurance broker include the following:

• What type of cover do you need? Some policies only cover death, but what would you do if you could not work due to long-term sickness or disability?

• Is the cover sufficient? Many people choose a policy that provides enough money to pay off their mortgage. Your family, however, might still need a day-to-day income.

• Are the premiums guaranteed? Some life schemes have premiums that are guaranteed not to increase for a set period of time — some as long as fifteen years — which can help you budget. Others will increase each year, so check your policy.

• How much can you afford? There’s no point taking out a costly policy that you will be forced to stop paying into after a few months. A good broker will help you find the right life cover to suit your pocket.

Do you have life insurance? Or have you also recently cancelled? Leave a comment below to tell us what you think...