Your financial wellbeing has never been more important – now is the time
The outbreak and rapid spread across the globe of COVID-19 shocked the world and left many already struggling economies, and even strong economies, in trouble. The good news is that measures can be implemented to help individuals to cope with the situation. Iemas Insurance Brokers’ experts give their perspective on how to manage ones’ personal finances during this challenging time.
What is the most important piece of financial advice that you can give?
Charles Makondo, National Sales Manager: Financial Advisory Services: Each persons’ financial situation is different, however one tip I can give to anyone is to take stock of your finances – the way you spend no matter what your circumstances, definitely changed since the outbreak of COVID-19. Do not make the calculations in your head, sit down and make a list of all your expenses to compile your personal budget. Make sure that you understand how much your income is, what your expenses are and how both your income and expenses are affected now and going forward.
What steps can you take to remain financially stable if your income has been reduced?
Lize Badenhorst, General Manager short-term insurance: When you look at your budget, make sure that you highlight those items that might have medium- to longer-term financial impact if not paid. This will include your rent or home loan payment, vehicle finance installment, water and electricity, levies and rates and taxes (if you are a homeowner), medical aid contributions, home, car and personal belongings insurance, as well as your retirement annuity, funeral and life insurance products. If you have additional debt, make sure that those accounts are also included.
Is insurance not an expense that you can easily cancel to increase your cash flow?
Lize Badenhorst: Unfortunately, the opposite is true. The most important reason why canceling your insurance is a bad idea is, as we have seen with the outbreak of COVID-19, anything can happen. For example, during the lockdown period we’ve had instances where our clients claimed for hail damage after severe hailstorms in Middelburg and Kimberley. If they did not have insurance, they would have suffered major financial losses. As a broker, we have many insurance partners – some of which offer relief options and instalment reductions during this time. So, it is advisable to contact your broker to find out if there are any payment options available on your policy. Just remember that each insurer’s offering will be different and will be subject to terms and conditions.
Are there any other long-term consequences?
Lize Badenhorst: If you cancel your insurance policy completely for a period of time and reinstate it again later, you could be penalised for having a break in your insurance. Rather speak to your insurer or broker about payment break options. Apart from having to find money for unexpected loss when you are not insured, you will also end up with a higher premium when you later want to re-instate your insurance. Both will have a long-term negative effect on your finances.
Can you make changes to your long-term insurance (i.e. life and funeral) and investment policies?
Charles Makondo: You can always speak to a financial advisor about different cover options you may require or perhaps about more affordable products. However, canceling your insurance policies could have dire consequences, especially when there is a global health pandemic. Your Will and Estate planning should also be a priority and is essential for your life file – a file with all your important documents that your family will need, should something happen to you. In terms of your retirement annuities and investments – even though the markets have been negatively impacted, my golden rule is to stay put. Do not make any impulsive decisions, keep your portfolio as is - better to have some savings than having nothing for the future.
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