that the increase in healthcare costs tend to sit 3 % to 4 % higher than CPI .
Yes , we are all used to increases in our monthly contributions to our medical aid , but ever considered that as much as you are paying more for your medical aid , the value for which you are covered , remained the same ?
You should also keep in mind that as much as an inflationary increase is typically associated with paying more for things , it often also means that the value of assets , such as the property you own , has similarly increased .
That is why you should also review the impact higher inflation has on your insurance cover . When reviewing your insurance cover , you should always determine whether the total cover you have bought will cover all your assets as they increase over time .
Adjusting benefits
At PPS , we are very aware of the impact this could have on our members if they ever need to claim . As much as they will receive the pay-out they are entitled to for a valid claim , the amount that pays out might simply “ buy ” them way less than what they expected – or more importantly – what they need .
Remember , adjusting one ’ s benefits to keep up with inflation is not the same as the annual increase in premiums most people receive as per their policy contract .
As any financial adviser would have explained when initially activating life insurance cover for a client , a policyholder will either be charged a level-rated premium or one that increases each year . Such an annual increase can be at a fixed percentage or in line with age-rated increases . This increase is also inflation-related but in this case it is still paying for the same product ( policy ) that was originally bought . Just as you pay more for that one litre of fuel , but still only receive one litre , you pay more for your insurance , but you do not receive a bigger pay-out .
Increasing one ’ s cover is , therefore , a completely different process and not always easy . A major challenge of doing so is that this could mean that new underwriting is required . Something might have happened that would lead to an insurer being unwilling to approve increased cover applied for . It is for this reason that , every year , PPS adjusts the cover – or in other words , the benefits our members enjoy . And , because they are existing members – no matter what happened during the previous year – this adjustment is done without any additional underwriting .
Yes , when your sum assured increases you have more cover and this increased amount of cover will cost you a little more . And as much as it is tempting to , after a tough year , spoil yourself with your bonus and salary increase , always remind yourself why you have taken out insurance benefits to start with : to protect you and your family . You would not want inflation – and not planning for it – to eat away at your goal of being financially well .
Motshabi Nomvethe
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