Demystifying premium patterns in life policies
A premium pattern on a life product is illustrated by the graph of the increases in premium over the potential life of the product from inception. Creative use of premium patterns is one of the subtle ways that brokers or call centres will ‘persuade’ someone to switch their life policy to another provider. Even if your advisor has gone to pains to demonstrate the difference in premium patterns, that sort of detail is easily forgotten over time, and the prospect of saving several hundred rand a month can be very compelling.
6 Ways you can save
Nobody likes wasting money – and often we do it unwittingly. Purchases made out of fear instead of logic, getting lost in the smoke and mirrors of complicated small print. Here are some simple ways you can divert unnecessary expenditure items in your financial profile into real return on investment.
When should you calm down your investment?
I get two questions from my clients when it comes to investments at the moment. Either “What can I buy/switch to get the returns everyone is talking about” or “I hope you’re going to tell me when to sell down.”
The general consensus is the stock market is ‘over valued’ but there isn’t a unanimous consensus that it’s about to tank. For over 5 years it has been rising like a feather (with a strong undercurrent) with a few wobbles. We all know – it can sink like a stone in days or weeks. The right time to buy was probably early 2008, but you had to have steel you-know-whats to be that contrarian. When the world and it’s brother, your neighbour, his dog and mother-in-law are all piling into the market – like now – guess what? It might be time to take the profit off the table.
Why is the All share steaming ahead when the economy isn’t. Logically one would think that until earnings get back to the glory days pre-2007, then the stockmarket should lag, but that isn’t the case.
The risk of disability
Like many of my clients out there, I always used to think that disability cover was a ‘nice-to-have’ grudge purchase until I came into the industry and face to face with claims. I couldn’t be more wrong. After life cover for minor dependants, (spice can go out and get a job), it is actually top of the risk list. Somehow it’s okay to spend thousands on comprehensive cover on a car, but if you happen to be in that car that is ‘written off’ there is a good chance you will be in need of as much panel beating as the car! Okay, so maybe it’s politically incorrect to joke about this sort of thing, but it’s about time someone blew away the smoke and obfuscation (yes, I had to spellcheck that one) surrounding temporary and permanent disability.
It’s catch 22. Interest rates are going up, disposable incomes aren’t keeping up, and we get slammed with a double digit household contents insurance premium increase. Is there fat there that you can get rid of? Most of us in RSA have been victims of housebreaking at one time or another. When it came to claims, more often than not, don’t have our expectations met. Whole industries have popped up in support of this ‘light fingered’ ethos that we all have to live with. Alarms, electric fences, insurance replacement companies, armed response, neighbourhood watch, boomed suburbs etc.
Aren’t estate plans for the elite?
Doing even the simplest estate plan seems too much of a morbid undertaking for many of my clients – so can it make any difference anyway – should you really bother?
We’ve all driven past auction boards declaring ‘insolvent estate’ – do you know what that really means? It isn’t that the dear departed was bankrupt, maybe not even close, but that there was insufficient CASH in the estate to pay SARS, the master, the executor and any outstanding debts. If all the value in the estate is tied up in an ‘immovable assets’ like property or company shares then the executor may have no option but to ‘create liquidity’, especially if a beneficiary isn’t willing to ‘pony up’ the amount from a life policy. A simple estate plan will uncover this.Community of Property estates can be landed with DOUBLE executors fees unless the fees are made negotiable (by removing banks/lawyers from the automatically becoming the executor and making it negotiable at the time by a family member).