Your weekly dose of financial help

Weekly financial tips by a personal financial advisor

Quite a lot of us still own older financial products with insurance companies called conventional policies. These products were constructed by combining your risk and savings benefits. At claim stage the greater of your risk benefit or the cash value on your policy will be payable. This entails that should the cash value exceeds the risk benefit you will only receive the cash value if a claim arises.

During the early 2000’s this practice was changed to the benefit of the client. Risk products and investment products were separated to assure that the Insurance Company entertains risk claims from their own risk pools and the client’s investments are separately protected. Yet a lot of us still have these conventional policies and are paying hard-earned money towards it without getting the best value for our premiums.

Conventional policies were often ceded to financial institutions as security against debt owed by the policy holder. Many clients paid off the debt and never received their policies back from the financial institution. If they did not keep on contributing to the premium of the policy after the debt was settled, the insurance company would apply the cash value to maintain the premium. Once this is depleted the policy would lapse and the policy holder will lose all benefits and all contributions made.

If you bought life insurance from any insurance house more than 15 years ago chances are you still own this older generation policies and you are thus paying excess premiums for your risk benefits to accommodate the savings part of the product. Please feel free to contact the writer on 013- 235-9586 or 079-974-1737 for the best personal financial advice.