As South Africans come under growing financial pressure, some are making financial trade-offs to free up emergency cash – like cancelling or suspending their insurance cover.

Recent data from the Association for Savings and Investment South Africa (ASISA) shows that risk policy lapses are rising again after declining for three consecutive years, with 8.7 million policies lapsing in 2025 (up from 8.2 million in 2024 and 8.3 million in 2023). A lapse occurs when the policyholder stops paying premiums on a risk policy, resulting in a lack of fund value.

Cancelling your insurance cover is not a wise choice, but, given our human nature, it may feel perfectly rational and logical in the moment.

Humans are naturally wired to respond in certain ways. Our behavioural biases include loss aversion, which makes paying an insurance premium feel like a loss, with uncertain benefits. Present bias pushes us to satisfy our immediate needs rather than pay towards a distant, possible insurance payout. Then there’s optimism bias, which leads us to believe that “it won’t happen to me”.

These responses sound logical – and it takes a lot of discipline and careful consideration to react differently and not make a decision around your insurance cover that may cost you dearly in the long run. If an unexpected death or health event happens during the period

when your cover was interrupted, you or your loved ones will be left without protection, exposed at the most desperate time.

But let’s say you want to cancel (or pause) your insurance premium payments. What are your options, and what actions can you take to keep your cover in place?

One form of protection is the grace period, a regulatory benefit we all enjoy. Clients generally have 30 days after a premium is due to pay a missed premium. This has no implications on the level of cover enjoyed.

Some insurers and products may also allow you to skip a couple of premiums, without cancelling the policy as a whole. In this case, you will not be covered after the contractual grace period has elapsed, or for health issues that first arise in that “off-period”. However, the benefit is that your cover may automatically resume when you pay your next premium.

Another option is to reduce your cover to a more sustainable level in the long run. As insurers, we often see clients who are “cover-rich” but “cashflow-poor”. If that sounds like you, speak to your financial advisers about switching to a balanced, affordable level of cover.

It may also be possible to skip, cancel, or reduce the level of annual cover increases on your policy. Yes, inflation protection is important, but perhaps not at the cost of keeping the policy in place continuously.

Once you’ve exhausted all your options, including carefully considering your monthly budget priorities, your last resort may be to cancel the policy – or your insurance company may have no other choice than to lapse your policy. This will have serious consequences from a coverage standpoint, ranging from direct impacts on your unprotected beneficiaries to indirect impacts like the risk of going into debt to pay for uncovered events.

For a limited period after the policy has lapsed, your insurer may generously offer to reinstate your cover at the previous terms and conditions. I say “generously”, because they have no contractual obligation to do so. The insurer’s terms, conditions and limitations will apply.

However, any reinstatement will be subject to some underwriting checks to confirm that the previous terms can still be offered and that you have not suffered a substantial deterioration

in health since you took out the policy. If your health is in order and the interruption in premiums was temporary, this may be a great option to proactively discuss with your insurer.

If that fails, your only remaining option will be to take out a new policy, subject to new underwriting. Your premiums will likely be higher because you’ll be older, and there may be new or higher medical loadings if your health has deteriorated. You might not even be able to access new insurance coverage at all.

The value of insurance cover can be difficult to understand – and, because of our behavioural biases, it’s often unappreciated. Some insurers offer cashback to clients who keep their policies in force and don’t claim, to make the benefits feel more tangible. For example, Sanlam offers Wealth Bonus®, a monetary reward for staying the course. It is built into participating products across the Sanlam Group, helping clients build meaningful long-term wealth.

If your budget is tight and you’re getting desperate, sit with your financial adviser and carefully consider the value of these benefits. You might find that there are other priorities in your budget that can be sacrificed in favour of maintaining your insurance cover – and your peace of mind.