I have come across many individuals who have the policies that I refer to as the ‘mixed biryani’ all-in-one endowment or retirement annuity. It’s a non-transparent life insurance policy that’s concealed in a savings vehicle.

Brokers in the past, unfortunately had the habit of seducing customers into believing that the bulk of the premium is attributed towards the saving and the risk benefits are pretty much great bonuses for ‘just in case.’ Wrong! Majority if the premium goes towards the risk benefits. Be cautious in being overly expectant at what the maturity will be.

Unfortunately full disclosure was not vehemently imposed by legislation in preceding years so the percentage that went towards the actual nest egg was not adequately disclosed. This type of policy chiefly made for a quick and stress-free sale for the broker but in many cases grossly lacked any sort of financial strategising for the clients.

To add salt to the wound, these policies were very often not reviewed, or were poorly invested in markets and this further lead to poor returns. Another fault that this sort of policy potentially has is, if one wishes to continue with the risk benefits once the policy term has matured they essentially much need new cover, which is costly due to one’s age being much older than they were at the initial application stage.

Of course if their health suffered, they may be severely loaded or deemed uninsurable and declined altogether. Then there’s the material issue of accelerated benefits, it’s shocking how all benefits are equal e.g. if one has an equal amount of life cover and disability and sickness and all are valued at R500 000 each, if the client puts a claims through for the sickness cover – poof! All the other benefits fall away.

There may be a justifiable reason it was structured like this in some instances e.g. it was ceded towards a bond cover but at most times there is no apparent rationalisation.

The more functional options would be to separate one’s savings and one’s risk cover because they each serve totally different purposes and are for different objectives in one’s financial planning. I cannot emphasise how imperative it is to firstly go through your policy documents and question it.

Is there is an actual tangible plan behind this product? How does this fit into your life strategies? Do you fully understand this product and is it to your benefit? Have you reviewed it with a professional financial planner?

Before it’s too late I suggest some sort of damage control should be executed if this applies to you so that your planning can be aligned to your goals and circumstances.

Your planner should help you take into consideration penalties and risks in replacing it wholly or partially and only make the necessary changes IF you are placed in an enhanced financial position.