Many young South Africans are not purchasing life insurance policies, highlighting a significant coverage gap, according to Old Mutual. Despite 62% of young adults (18 years to 29 years) recognising the importance of financial security, only 17% have life insurance coverage, according to the 2024 Old Mutual Savings and Investment Monitor.
According to Howard Freese, Certified Financial Planner® at Old Mutual Personal Finance, although many young adults are aware of the need for financial security, a much smaller percentage are translating this awareness into action by obtaining life insurance. “Life is busy, and insurance is often seen as something that can be dealt with later.
“This tendency to delay important financial decisions can leave young people and their families vulnerable to unexpected events. Various financial challenges and a lack of prioritisation deter young adults from investing in life cover.”
He says that unanticipated accidents are the leading cause of death for people under the age of 30 in South Africa. According to Old Mutual's latest claims statistics, traumas made up 30% of all death claims, with motor vehicle accidents accounting for 43% of these trauma claims.
Freese says that, at first, South Africans are hesitant to buy life insurance because they prefer to invest their money in things they can physically own and seek immediate benefits from their spending. "Younger people want instant gratification, which life insurance doesn't provide even though it offers peace of mind and significant long-term value," he explains.
Freese underscores that life insurance provides essential financial protection for loved ones in the event of an unexpected death. "Life insurance can still be an essential financial safety net even if you don't have children.
"Consider the investment your parents have made in your education and upbringing. They might have used a significant portion of their life savings to provide you with the best opportunities. While your parents may or may not still be working now, they might not have sufficient funds saved for their retirement. A life insurance policy can provide them with a financial cushion, allowing them to maintain their quality of life even if you’re not there to support them," he says.
Securing life insurance at a young age also typically results in lower premiums, which can lead to long-term savings. “Younger people are generally healthier, which results in lower premiums.
“Securing life insurance early allows them to lock in these affordable fixed rates for the duration of their policy. This not only ensures cost-effective coverage but also provides financial stability, allowing them to plan for the long term without worrying about increasing costs as they age,” says Freese.
Freese highlights the need for financial education to address misconceptions about costs and the necessity of life insurance. "There is a significant lack of understanding about the different types of coverage and necessary amounts," he says. Proactive engagement from financial advisers can help young adults make informed decisions about life insurance.
Freese says that financial priorities such as rent, groceries, and building an asset base should not overshadow the need for life insurance. "Life cover is a small sacrifice for significant long-term gain, ensuring that you and your loved ones are protected in the face of life's uncertainties. Seeking financial advice is key to helping young adults see the value of life insurance and how it fits into their overall financial plan."
PERSONAL FINANCE