6 Best Life Insurance Companies in South Africa

When death is one of two things in life you can be sure of as inevitable, life insurance cover seems a must for everyone. Life Insurance is never a one-size-fits-all option. The cover can be personalised according to profiles and unique needs and is guided by industry policies and frameworks.

Many are unsure what to look at when considering life insurance, and where to find the right product for their individual needs. This article will discuss the top life insurance companies in South Africa, as well as outline how to select a product to fit specific and various needs.

What is Life Insurance?

Life Insurance is a legally binding contract between an insurer and an insured which requires the policyholder to pay a premium to the insurer in exchange for the guarantee of a pay-out to the insured’s beneficiaries upon the death of the insured.

Premiums can be paid as a single premium upfront, however, premiums are typically paid regularly, usually monthly or annually, over time.

Since the life policy is a contract, certain information is mandatory for the contract to be enforceable. The application for cover must provide full disclosure on the part of the life to be insured. It is imperative to disclose all current and past health conditions pertinent to the insured life when completing the application process. Any high-risk activities in which the insured partakes must also be fully detailed.

Upon the death of the insured, the named beneficiaries stipulated in the policy will collect the death benefit.

How did we determine the best life insurers in South Africa?

Factors that are measured to determine the ratings of the top Life Insurance companies in South Africa are perceived value, complaints incidence and resolution, customer loyalty, and the practice of treating customers fairly (TCF). Of the five top insurers, some feature highly in all these determinants while some may rate extraordinarily high in one or two, and not feature in others.

The firm Consulta is a South African firm specialising in customer experience management. Consulta feeds customer experiences into the South African Customer Satisfaction Index (SA-csi) for Life Insurance to garner annual results. These results provide illuminating methodical insight into overall customer satisfaction in South Africa’s major life insurers.

Perceived Value – Does the quality of the product measure up to the premium paid? Perceived value is the measure of the quality relative to the price paid.

Complaints Incidence and Resolution – Fees and costs account for the most complaints (14%), followed by problems and issues (9%), the response time (8%), and then personal contact (7%). Communication, response time, and personal contact are significantly apparent contentious areas among those customers who lodged complaints.

Customer Loyalty – Customer loyalty across the life insurance sector has fallen from 73.6% in 2014 to a paltry 64.8% in 2018. The industry has not earned this bad rap according to research. The industry labours under the common misconception that life insurers do their best not to pay claims. The Association for Savings and Investment South Africa (Asisa) shows in their 2018 figures that life insurers paid 99.3% of the value of all claims lodged. Social media and reporting on repudiations may well play a significant role in perpetuating the fallacy.

Treating Customers Fairly (TCF) – The fair treatment of customers reinforces the General Code of Conduct for South Africa’s financial services providers (FSPs) and their representatives. It provides a working framework for life insurers in their daily dealings with customers, ensuring fair treatment. The framework guides FSPs towards six TCF outcomes within a TCF culture:

  • design products to meet the client’s needs;
  • keep clients suitably informed before, during and after the time of purchasing of a life policy;
  • ensure that any advice given is suitable and in conjunction with the client’s circumstances;
  • ensure that products perform as the client has been led to believe they will; and
  • eliminate any unreasonable post-sale barriers should the client wish to change or replace a policy, submit a claim, or lodge a complaint.

Best Life Insurance Companies in South Africa

Immersed in a year to date overwhelmed as it is by a global pandemic and consequential government-enforced lockdown in South Africa, the 2019 South African Customer Satisfaction Index (SA-csi) for Life Insurance shows the following results for our pick of insurers:

FNB Life

Topping the list of best South African life insurers is a bancassurance provider rather than a traditional life insurer. FNB is a relatively new player in the country’s insurance arena, selling insurance products through its banking channels. FNB Life scores 82,2 in the Customer Satisfaction Overall Index, coming in as a market leader.

Perceived value – South African Customer Satisfaction Index (SA-csi) 2019 results showed FNB Life to have a perceived value score of 84,8, down from their market lead of 87,1 in 2018 and compared with the industry par of 79.9.

Complaints Incidence and Resolution – FNB’s complaint incidence score of 7.9% falls remarkably below the industry average of 8.2%. The industry par of 45.7 in complaint handling score is impressively surpassed with a score of 75.6. Globally a score of over 50/100 is considered world-class.

Customer Loyalty – FNB Life once again leads the industry pack with 73% loyal customers, topping the industry par of 68%. They are among three companies to show an improvement since 2018 when they were the only company to have managed an increased customer loyalty score up from 2017.

Treating Customers Fairly (TCF) – Maintaining their industry lead in yet another rating, FNB scores an impressive 85.6, down from 2018’s 87.6, again exceeding the industry par of 81.9.

Visit FNB Life

Metropolitan Company

Metropolitan is among the two leaders in scores on the South African Customer Satisfaction Index, which is testimony to their leadership in customer satisfaction in the South African Life cover arena. The company scores 79,6 in the Customer Satisfaction Overall Index, on par with the market average.

Perceived value – South African Customer Satisfaction Index (SA-csi) 2018 results showed perceived value of 81.6 compared with the industry par of 79.2. They are second only to FNB Life and only one of three to come in at above industry average. No results are shown for 2019.

Overall Metropolitan has been on par for the last three years, with the second-highest gain of 0.3 index points from 2016.

Complaints Incidence and Resolution – Metropolitan is second only to FNB Life with a complaint incidence of 6.8% and a score of 56.7 on the complaint handling score index.

Treating Customers Fairly (TCF) – The 2019 score shows an above average of 83,5 for fair treatment, above the industry average of 81.9 after sneaking in above the industry average of 80.2 in 2018.

Visit Metropolitan

Sanlam Company

Sanlam is one of the country’s original life cover companies. Established in South Africa for South Africans over a century ago, Sanlam has become one of the world’s fifty largest internationally active insurance groups. The company is on par with the market average with a score of 78,6 in the Customer Satisfaction Overall Index.

Perceived value – The company maintains an average on par with the industry average of 79.5.

Complaints Incidence and Resolution – Sanlam’s complaint handling score of 33.8 is the lowest on the index score for 2018, way below the industry average of 45.7, and indicates a significant decline from the previous year’s score of 57.3.

Treating Customers Fairly (TCF) – Sanlam scored an above average of 82.4 for fair treatment of customers, comfortably above the industry par of 81.9.

Visit Sanalam

Discovery Life

On the Customer Satisfaction Overall Index, Discovery Life scored below industry par, with 75,7.

Perceived value – Discovery Life remains below industry average according to SAcsi’s figures. The company did, however, show as the most improved in 2018 and in 2019 are up from 74 to 75 between 2016 and 2019.

Treating Customers Fairly (TCF) – Discovery Life has not managed to reach the industry average of 81.9 in their score of 75.9.

Visit Discovery Life

Old Mutual

Celebrating its 175th year, Old Mutual was South Africa’s first mutual life assurance society, established in Cape Town in 1845. Their aim is to help South Africans thrive through the achievement of their lifetime financial goals. The company is currently leading the Life insurance industry in the Customer Satisfaction Overall Index with a score of 80,3.

Perceived value – With a score of 81,7, Old mutual again lead against the industry average of 79.5.

Customer Loyalty – Old Mutual with a score of 70,3% is one of only three South African Life insurers with a percentage above the industry par of 68%. All three show an improvement in loyalty scores compared with 2018.

Treating Customers Fairly (TCF) – Old Mutual scores highly on TCF, with 83,3 compared to an industry par of 81,9.

Visit Old Mutual Life

Simply Life

Simply is another relatively new kid on the block, describing themselves as a disruptive digital life company on a mission to secure the financial futures of millions of South Africans. The company aims to fill the “dire need” for affordable life insurance products in South Africa that are also easily understandable. Simply was founded by three partners wanting to use their collective and individual experiences and skills to achieve positive and meaningful results. They market, distribute, and service long-term insurance products, and their policies are underwritten by Old Mutual Alternative Risk Transfer Limited (OMART).

What do Simplify Life offer South Africans?

Simply Family offers easy online applications that require full disclosure in the form of answers to health questions, and do not require blood tests or medicals. Instant life cover and disability cover is available up to R2 million as well as funeral cover for individuals or families of up to R50,000 at a reasonable premium.

Visit Simply Life

Choose the Right Cover

When looking at insuring your life, it is important to look at your personal circumstances and unique needs. You need to be able to afford your financial commitment as well as ensuring sufficient future payout in the event of a claim against the policy.

How Much Life Insurance is Right for Me?

Your financial situation determines how much you can afford to spend, but also how much is likely to be enough to maintain the beneficiaries’ standard of living, given inflationary changes. Debt plays a big role in considering the final figure, as your insurance should not leave your beneficiary indebted following your death.

Types of Life Insurance

Types of insurance vary according to preference and needs.

Term life insurance

This has a predetermined term which is selected at the time of taking out the policy. Typically terms are 10, 20, or 30 years.

Level Term

Premiums remain the same every year.

Increasing Term (yearly renewable term)

Premiums increase with age, starting off lower the younger the age.

Permanent

Usually more expensive than term policies, permanent policies remain in force for the duration of the insured’s life, provided the premiums are paid, or until the policyholder surrenders the policy.

Single Premium

The premium is paid upfront rather than in regular monthly, quarterly, or annual payments.

Whole life insurance

A permanent life insurance that accumulates cash value.

Universal Life

Permanent life insurance with premiums similar to term cover. Universal cover has a cash value component that earns interest, and the premiums and death benefit can be adjusted over time, unlike typical life policies. This gives the policyholder flexibility with payments.

Guaranteed Universal

Carries lower premiums than whole life cover and does not build a cash value.

Variable Universal

Policyholders may invest the policy’s cash value.

Indexed Universal

Insurance that affords the policyholder a fixed or equity-indexed rate of return on the cash value component.

Burial or Final Expense

Permanent life insurance with a nominal death benefit which may be used by the beneficiaries as they wish.

Guaranteed Issue

A permanent life insurance for otherwise uninsurable people with medical issues which makes them high risk. Death benefits are not payable within the first two years of the policy life, unless by accidental causes.

Life Insurance Riders

Policyholders may have the option of personalising and modifying their life policies according to their unique needs through the purchasing of available Riders at additional premiums. Examples of Riders include:

  • accidental death benefit – additional life insurance cover for accidental death
  • premium waiver – premium payment relief should the insured become disabled and unable to work
  • disability income – monthly income is paid out should the insured suffer a serious illness or injury that renders them unfit to work for several months or longer
  • accelerated death benefit – a portion of the death benefit is accessible upon diagnosis of terminal illness
  • long-term care – accelerated death benefit to be used for a nursing home, assisted living, or in-home care costs should the insured need assistance with normal daily activities
  • guaranteed insurability – additional cover may be purchased after effecting the policy without a medical review

Factors to Consider in a Life Insurance Policy

While everyone would benefit from having life cover, there are circumstances which considerably increase the need for life insurance to provide financial support to surviving dependents or beneficiaries.

Parent of minor children

The cover provides financial stability for surviving minors when a parent passes away. Without the parent’s income and caregiving role, insurance provides the financial resources required until minors become financially self-sufficient.

For special needs adult children who require lifelong care after the parents have passed, parents can rest assured that their life cover will see to the child’s needs for life.

Adults who co-own property

Life cover that covers expenses attached to a property owned together, whether in our outside of marriage, will ensure the surviving owner can afford to retain the property.

Young adults with debts co-signed by a parent

A child with life cover on the debt owing can rest assured that their parents are not saddled with their debt should the child die.

Young adults

Youth attracts lower premiums on life cover and it may be fortuitous to buy a policy as a healthier 20-something adult especially for those intending to have children.

Wealthy tax-aware families

Life cover ensures funds posthumously to pay estate taxes due without compromising the value of the estate.

Burial and funeral expenses

Nominal policy to cover expenses of this nature.

Married pensioners

Pensioners can buy life cover with a portion of their pension pay-out in a procedure known as pension maximization, nominating the spouse as beneficiary.

Misconceptions about Life Insurance Among South Africans

It is common for South Africans to regard life insurance as expensive and difficult to acquire which has resulted in an uninsured population with a possible current gap of as much as R30 trillion. The reasons for this gap are threefold: lack of disposable income, lack of easy access to insurance products, and lack of insurance culture in the country.

What Questions Should You Ask?

It is important to find out what you need and all the available options so that you are sure you have the correct coverage for your personal needs.

Am I making the right choice?

Determining whether your life insurance company and/or broker fits your needs is of utmost importance before committing with a signature. South African financial services providers must be licensed by the Financial Services Boards (FSB). To check whether your insurance company or broker is compliant and registered, contact the FSB on 0800 110 443.

How do I determine the amount of life insurance I will need?

Two factors determine your needs in this case: firstly, the period calculated for you to settle your debts, and secondly, how much money your dependents will need to maintain the lifestyle they are used after your death. Ask your insurance company whether their calculations are based on estimation or analysis as understanding the way in which your need is determined is very important.

Will I be sufficiently covered?

Your life insurance company or broker will be able to guide you through the financial needs analysis. The analysis calculates your required cover, using information on any life insurance policies you may already have in place, assessing your existing assets and liabilities. Your debts, marital status, and children must all be taken into consideration at this time.

Am I covered for a limited term?

Buying term cover will insure you for a predetermined period of time, usually 5, 10, or 20 years. Buying a whole life policy covers you for life

Will my premiums ever increase?

All life policies are subject to a premium increase. Make sure you know how often the premium will increase, by how much, and when the increases will be applied. Brokerage fees will also apply, usually payable monthly, should you be taking out cover through a broker.

Does the policy apply exclusions?

Exclusions are any circumstances or specific conditions under which your life insurance company will not cover your life. Dangerous sports and extreme or adventure activities, such as rock climbing and mountain biking are usually standard exclusions on a life policy.

Is there a waiting period on the policy?

Depending on the type of cover taken, certain waiting periods may be imposed for suicide and natural death. Your life will in such cases not be covered in terms of the policy for the stipulated period should death be as a result of an accident or by your own hand.

Is there an investment component to the life insurance policy?

Universal life policies include an investment component attached to the life policy. Interest rates applied to the investment component on a universal life insurance policy must be checked for competitiveness. Find out about the administration fees charged by the life insurance company to determine whether you have a competitive product. Also ask about any surrender fees should you decide to cancel your policy before the accepted period of time.

Am I required to undergo a medical examination as a prerequisite to buying the policy?

Risk factors are based on a medical exam for any life insurance cover in order to also calculate appropriate premiums.

What if I miss a premium payment?

A missed premium payment may result in your policy lapsing. Discuss options with your insurer as alternatives may be available, depending on the cover and the company.

Taking out life insurance cover is a very personal matter. When the event arises that allows for the benefits to be paid out, it will certainly be an emotional and mentally trying time for the family. Take all of this into account when choosing an insurance company, broker, and life policy. The last thing you want for your family at a time when they are mourning your passing is to battle the very entity you will have paid for many years to safeguard their welfare.