When is it too late to take out life insurance?

There are different types of cover that can protect you and your loved ones under difficult circumstances, such as retrenchment, disability or death. Life cover ensures that your beneficiaries receive tax-free pay-outs when you die, and takes care of your estate costs, but other types of cover protect you if you’re critically ill or need to pay off debt.

This article looks specifically at life insurance and considers whether it’s too late to take out cover if you’re middle-aged or older. We investigate what your options are, and whether there are alternatives to life cover if you are declined by insurers.

Tip: Unit trusts are a good saving vehicle and can help you to self-insure. Find out how to invest in them here.

How much life cover do you need?

Some employers offer benefits such as life and disability cover, but these are always linked to your continued employment. You may need to add to this cover, in much the same way as you would supplement your retirement savings, says Craig Baker, CEO of MiWayLife.

“When you are younger, you often need cover that protects you if you can’t earn, such as disability or income protection. As you get older and start a family, life cover becomes increasingly important to ensure your family can continue living as they do now, should something happen to you,” Baker explains.

“In addition, you may need critical illness cover as you age, or you may want to plan for estate duties and taxes.”

It’s also a good idea to have cover that safeguards both your family and your estate if you run your own business, or you’ve accumulated wealth and property.

“If you don’t have life insurance, your dependents may not have enough money to live on, or their education won’t be paid for,” Baker says. “In addition, your estate may have to sell your assets to cover your debts, estate duties, or the legal costs associated with winding up an estate.”

Capital gains on property become taxable after death, for example, so it’s vital you have enough liquidity in your estate to cover these taxes.

Can your application for life cover be declined?

You may not be able to get some types of life cover when you are older, says Baker.

“It’s difficult to get cover if you’re unhealthy or you have specific risky conditions,” he warns. “People are generally declined where the risk to the insurer is beyond their risk appetite, and this is usually related to their health, habits, occupations or hobbies.”

Each case is usually evaluated on its merits, and some companies are still prepared to offer cover if you manage a chronic condition like HIV or diabetes, says Sylvia Walker, financial planner at Andrew Prior Consultants and author of Smartwoman, How to Gain Financial Independence and Create Wealth.

“Shop around, as different insurers approach risk assessment in different ways,” says Cherise Erasmus, a financial planner at Crue Invest. “If you can’t get any cover at all, simply self-insure – that is, put the equivalent of a premium into an investment vehicle.

"This may not mean that you will have the insured amount available that you were hoping to get, but it will be better than nothing.”

You can also consider accidental cover, which doesn’t involve any blood tests.

“This covers you if you pass away in an accident,” says Munaf Mukadam, a financial adviser at Gradidge-Mahura Investments. “But if you die of complications from diabetes or a heart condition, for example, you won’t get a payout.

“Alternatively, you can take out funeral cover,” Munaf says. “The value for money is not as great, as you pay more for less cover, but there is no underwriting up to amounts of around R50,000. Note that there’s a six-month exclusion if you pass away from natural causes.”

Some companies offer life cover “with no medical required”. These companies usually underwrite at claims stage, which means they don’t assess risk when you apply for the policy.

“If they later find out you had a medical condition and you didn’t disclose it, they won’t pay out, which means your premiums will be lost,” Walker says. “It is better to be underwritten, even if your premium is loaded for a medical reason. At least there is some cover that will pay out if you die.”

Take out life insurance when you’re young

The type of insurance you should take out is dependent on your specific needs and lifestyle, as well as what’s most important to you and what your risks are.

“I wouldn’t call life insurance a ‘nice to have’. Rather, look at the benefits that insurance products offer you and prioritise them in order of necessity,” says Erasmus.

For the average person, it’s cheaper to take out life insurance when you’re young, as health complications are generally fewer, and your risk of dying soon is lower, unless you have a health condition or a risky hobby or occupation. However, the downside is that you could be spending money on insurance you don’t yet need.

It is never too early to protect yourself against disablement, however.

“Illness cover ensures you can maintain your lifestyle if you’re too ill to work or you incur excessive medical costs,” Walker says.

Erasmus adds that, when it comes to needing assistance in the event of disability, you can put a capital disability policy in place. “This can pay for any changes that need to be made to your home to make your life easier, as well as ad hoc medical expenses,” she explains.

Walker says income protection can also be useful. “This can cover your student loan or bond if you’re retrenched or can’t work anymore,” she says.

The older you are, the more expensive life cover becomes. “Most insurers set the age limit at 65 years old, but you could theoretically apply up until the age of 80,” Walker says. “However, your need for life cover will lessen, as your children will probably be self-sufficient at that stage.”

Tip: If you’re struggling to pay off your debts, debt consolidation allows you to combine many debts into one single loan. Find out more here.