Rising policy lapses: a quick fix with long-term consequences

As more South Africans struggle under mounting financial pressure, many skip paying premiums on life and disability policies and the number of policies that lapse is on the rise again.

Data from the Association for Savings and Investment South Africa (ASISA) show that 8.7 million risk policies lapsed in 2025, up from 8.2 million in 2024 and 8.3 million in 2023.

Giving up your policy may feel like an easy way to bring financial relief if you are cash-strapped, as you do not lose anything immediately.

However, your policy is a safety net in times of crisis, and losing this cover may lead to more substantial problems down the line. You should weigh up losing your cover carefully and explore other solutions before allowing your policy to lapse.

Cancelling could have a long-term affect

Risk cover protects you and your family against a range of life events, including death, severe or critical illness, disability, or even other benefits depending on the policy’s terms. Without this protection, unexpected circumstances – which may be related to debt, medical expenses or daily living costs − could have devastating financial consequences.

“Losing your cover due to a lack of affordability can be disastrous in an already financially stretched situation,” warns Sue Torr, managing director at Crue Invest. “If you died, fell seriously ill, or became disabled, your family could be significantly worse off.”

Temporary solutions in a cash crunch

If you have a temporary cash-flow problem and miss a premium, you generally have a 30-day grace period during which you will not lose your cover. Your insurer may also permit you to skip several premiums without cancelling the policy entirely.

This means you will still enjoy cover for the first 30 days. Your cover then ceases but may resume when you start paying premiums again, Petrie Marx, product actuary for Sanlam Risk and Savings, says.

“For a limited period after the policy has lapsed, your insurer may generously offer to reinstate your cover at the previous terms and conditions,” he explains. “They have no contractual obligation to do so, and their terms, conditions, and limitations will apply.”

Alternatives to lapsing a policy

Cancelling your cover or allowing it to lapse because you haven’t paid the premiums should be a last resort. Before reaching this point, consider reducing costs in other areas, such as non-essential or discretionary spending.

According to George Kolbe, head of life insurance marketing and enablement at Momentum Life Insurance, there may also be other strategies that can ease financial pressure while helping you retain an appropriate amount of cover.

Check whether you qualify for discounts through a loyalty or rewards program, he and Marx suggest.

You can also ask your financial adviser whether a different premium pattern or policy structure could provide a more affordable and sustainable solution.

Another option may be to forego or reduce a voluntary annual cover increase, Marx suggests. If further relief is required, your financial adviser can review whether all your existing benefits and cover amounts remain appropriate.

Any reduction should be carefully considered because it will affect the value of your protection, which was probably put in place for specific reasons – ask yourself if those reasons have changed.

Provided that you remain healthy and insurable, another possible option is to replace whole-of-life cover with term insurance, which provides cover for a specified period, for which premiums are generally more affordable because the cover period is limited.

“This approach carries risks because the cover will end after the specified term,” Kolbe notes.

“However, some term policies may offer an option to convert to whole-of-life cover later, subject to the applicable policy terms. Existing cover should not be cancelled before any replacement cover has been accepted and is in force.”

Reinstating a lapsed policy

If your policy has lapsed, your insurer may allow you to reinstate it within a certain timeframe, subject to you having some health checks (underwriting). "If your health hasn't declined and the premium gap was temporary, reinstatement is often straightforward," says Marx.

“However, if you have developed health issues, you would need to take out a new policy subject to new underwriting,” he says. “Your premiums will likely be higher because you will be older, there may be new or higher medical loadings if your health has deteriorated, or you may not even be able to access new insurance coverage at all.”

Regular reviews keep track of your changing needs

Torr emphasises that regular consultations with your financial adviser help maintain relevant coverage at an affordable cost. You may also reach a stage where the cover is no longer necessary – perhaps because the original need has fallen away, you no longer have dependents, or you have built up sufficient assets to self-insure the risk.

“This is not a decision to be made lightly,” she warns. “It should be based on a thorough needs analysis, especially for someone who is relying on group life cover, which may terminate when employment changes.”

Be proactive

If you encounter financial difficulties, don’t let the matter slide. Review your expenses to identify potential savings and consult your financial adviser to explore ways to make your cover more affordable. Losing your protection means losing your peace of mind, and you can’t put a price on that.