Inflationary Impact on Life Insurance

To illustrate the inflationary impact on the value of money: it was not so long ago that a loaf of bread cost R5.

Today the same product costs close on R20.

That is the impact inflation has on consumer wallets.

Questions one must ask 

  1. What will food cost by retirement age?
  2. Will there be sufficient savings to maintain standards of living?
  3. Potential health care needs
  4. Financial assistance to family members

Keeping pace with the Inflationary Impact

Inflationary ImpactInflation is a worldwide phenomenon and insurance, like all other sectors of industry, is not immune to its effects.

Keeping life cover on a par with inflation rates will ensure that beneficiaries of the death benefit payouts are safe against any possible financial losses by increases in the cost of living.

Avoid wealth erosion

Here is a simple example of inflationary impacts on life insurance.

A policy worth R1 million is kept abreast with inflation by increasing its value by 6% annually. Ten years later the policy is worth R1.6 million.

Ten years down the line, the same policy that has not been increased in value to keep pace with inflation will be worth a mere R400 000.

It clearly demonstrates the ravages of inflation.

Combating Inflationary Impact

Most insurance companies offer policies to combat inflation.

They adjust Premiums annually to keep in step with inflation.

Consumers should discuss the anti-inflation mechanism with their financial advisors or brokers.

Matched savings

Consumers need to focus on matched savings to meet retirement needs.

According to Sanlam, people should concentrate on saving to generate a good income.

Life insurance is a gift of love, so paying more on premiums to fight inflation is an absolute necessity. Rather cut down on luxuries and devote more time to personal well-being and family and friends.

Seek expert advice

Most challenges in life stem from inadequate investment and financial know-how.

When taking out life insurance, discuss inflationary impacts on the value of the policy with a financial advisor.

So identify individual financial needs and obtain the necessary advice to ensure that the life cover keeps pace with inflation.

Financial needs could be ensuring that beneficiaries receive adequate payment to cover their financial future, such as the cost of medical care, vehicle replacements and daily household purchases.

Insurance companies dedicate many hours to project inflation and interest rates so heed their advice when it comes to increasing life cover premiums on an annual basis.


Historical data points to the 1980’s when, for almost the entire decade, South Africans suffered double-digit inflation, climbing to a staggering 20%+ in 1986.

So it stands to reason that when taking out life cover, policyholders should rather cut down on unnecessary expenditure and plough more money into their investment to safeguard those nearest and dearest in future years.

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All info was correct at time of publishing